That sounds incredibly stupid. What is the point of random exits and entries? Is he trying to say that this is what the average trader does? Even so, random entries/exists don't make a trader profitable so there is no point in having any size of account with that strategy.
That writer must be a business genius because he was able to publish his book...
Not familiar with this book but the point of random entries is the same as the coin toss exercise. It's something you do in the beginning to help you understand an edge in trading. You take these random trades usually in sim or in an e-micro or something similar in spot FX. You do it 100 times heads long tails short with 5 tick stop and target, for example. Then again with a slightly more sophisticated trade management process and you prove to yourself there can be an edge in the market by this alone after you calculate win rate and expectancy as you do a tiny bit better or worse than BE. Then you realize after you patiently wait for your trade to set up and execute it flawless you are procession of a true money making edge.
Doubt kills more dreams than failure ever will. Perfect: the enemy of Done. per·fec·tion·ist: ultimately one lacking self-confidence
Buy Low And Sell High (read left to right or right to left....lol)
Basicly he was saying that with a 30K account one can survive a coin flip strategy. The question is what exactly he meant by surviving? I assume going back to breakeven or so....
The problem with the coin flip analogy is that profitable traders has a better than 50% ROI strategy and if we count human psychology, losing traders has a much worse than 50%. (averaging into losers, cutting profits short and such)
All in all, that analogy is not valid so I don't see why it was included in the book...
I would say that it is very hard to make it in this game if you are under-capitalized. As mentioned yes events that are out of your control and even market lock limits although rare, do occur. Keep in mind you are trading super leveraged products when you play this game, so yes you can very well end up losing more than your initial balance. When the clearing issues margin calls on you, that's no fun either. Ask yourself how risk- averse you are before considering this business.
The following user says Thank You to dungpa for this post:
Trading a futures like ES you will be up against some of the best and most well capitalized traders on the planet. Not to mention big banks with billions and every conceivable advantage possible... options as their "stop" (which anybody can do well maybe not anybody ...those who know how to shall we say) you name it. If you are worried about the risks involved (which you very well should be just not to the point it stops you) why not just start your futures trading in something not necessarily trading by this group. YM or a e-micro futures like M6E etc.
Random exits and entries are the only smart way to look at the problem, unless of course you can see the future. Nobody can know if the next tick will be a continuation of the trend or the first in the inevitable reversal. The average trader generally does worse than 50-50.