The Stealthy Sisters of Spin and Speculation (Part 2)

I believe people often mistake Spin for responsible investing/trading. I suspect the same may be said about Speculation.

Mr. Know It All has admitted to consistent losses from day trading futures. I believe he does this to pass the time. He is retired and where other people pay for golf memberships or for tennis lessons, he pays to day trade.

A part of me does not believe trading/investing should ever be something done just to pass the time. If asked point blank, I don’t think Mr. Know It All would admit this either. [I hope] He would say he enjoys day trading and if he loses a little money on a consistent basis then he can afford it. I noticed early on that when people asked questions about trading/investing, Mr. Know It All was quick to stick his nose in [to an amusing extent] and give answers. Perhaps his day trading makes him feel qualified to seek this ego boost coming in the form of appreciation for his “knowledge.”

Yet, because he’s a consistent loser I regard Mr. Know It All as the last person who should ever be answering questions. What he does is clearly not trading as a business: consistent losses would make for a horrible business model! What he does is clearly not responsible trading/investing, either: consistent losses could land someone in the poorhouse!

I think most people interested to incorporate trading/investing into their lives are at least looking for supplemental income and at most seeking permanent long-term income replacement. I doubt any newbie is looking “just to pass the time” if the very activity done for the purpose of making money would do nothing more than generate small losses on a regular basis. Why listen to anyone who is doing just that, then?

A Losing Thesis (Part 2)

I realized this week how little discussion I have seen lately about trading losses.

Because I believe one of the best ways to improve as a trader is to discuss and study losses, I am a bit surprised more people aren’t doing this. I’m quite sure not everyone around me is realizing windfall trading profits. Is it a matter of ego where people feel ashamed/embarrassed to talk about losses since many regard losing as failure? Maybe people feel angry or depressed and don’t want to rub the sore spot? I talk freely about my losses and you will rarely hear me expressing heroic victory over a win unless I am being sarcastic.

Perhaps people aren’t talking about losses because they aren’t doing any significant trading. I mentioned the woman from August 11 who is currently out of the market. Everyone from that Tuesday Meetup mentioned a full-time job. Mr. Know It All, the day trader from the Wednesday Meetup, is retired so he probably isn’t devoting 40+ hours/week. I know a few others from that Meetup work full-time and hope to learn enough about investing to supplement income. Everyone in my option trading group has a separate full-time job.

It’s quite clear from my experience that the vast majority of traders do so part-time. The level of commitment among part-timers ranges from serious/intense to intermittent/zero. When trading part-time, it’s easy to close a position or two and not be trading at all.

One other thing is quite clear to me as well: people doing no trading are not developing as traders. Luck aside, if they want to make consistent money in the markets then they need to consistently work and develop the craft. I believe only the serious part-timers have a good chance to fare well so the rest might as well disappear when the going gets rough to live more comfortably, right?

Meetup Update (Part 3)

As previously discussed, the Tuesday Meetup included some boisterous, opinionated discussion along with a “professional quant” in attendance. Nothing there was actionable.

While I enjoy and recommend the Wednesday Meetup, I did not find that content actionable, either. While the title includes the words “investment academy,” this Meetup is an order of magnitude less specific than helping people to trade profitably. I do not fault the organizers since they cater to beginners. They did say on Wednesday one directive is to foster collaboration among the group, however. I will keep my eyes open over the next few events to see if we move any closer to fulfilling this actionable promise.

I have organized a small option trading group that meets every week. We have roughly six regular participants and a Yahoo! Group. I posted extensively about my losing weekly calendar and one other member posted about a losing monthly trade. Nobody else mentioned any losing trades. I thought back over the last few weeks and realized that while I post about my losing trades often, rarely does anybody else.

At the Wednesday Meetup, Mr. Know It All said he lost money that day in response to my direct questioning. Thinking such a wide-ranging market day would be good for day trading, I asked for details. He spoke for a couple minutes and then quickly changed the subject. Why he lost could have been precisely the kind of actionable information I seek but alas, that was not to be forthcoming.

On Tuesday night, I didn’t hear any meaningful discussion about losses aside from the Forex guy who is on a crusade. Contrary to my thesis, this might not be a reflection of inflated egos but it does make me wonder whether anybody is actually trading. The woman in attendance who I found to be extremely amusing said she was flat right now awaiting further direction by the market.

I will continue with my thesis on losses in the next post.