Friday, March 06, 2015

Water off a duck's back

I always get mildly amused when people decide to attack other traders in chatrooms, on bulletin boards or on social media simply for taking a position on a stock or instrument that is the opposite to their own.

I've had this in the past - I remember one particular episode where I was accused of de-ramping on a stock so I could buy back in at a lower price. This was after I got derided for having a win ratio of less than 70%. Water off a duck's back to me, and it clearly showed me their ignorance of how trend following works. But they were adamant that the stock was going to be a huge winner...

What I do know is that, on the basis of what they said was true (and no-one knows), of the two most abusive people surrounding that episode:
  • One supposedly re-mortgaged his house and ploughed all the money into a particular stock that was starting a downtrend - that stock ended up losing 90% of its value over the next year, while he held on the way down;
  • The other guy later let it slip that he had been holding a losing position for nine years, and that he didn't consider it to be a loss until he closed the position. Well, it's very easy to get a high win ratio if you never close a losing trade - until it takes all your cash.
I don't know whatever happened to them, but they did give the directors of the company a load of grief when they sold shares too!

That, my friends, is an example of who your opposition is.

What these people (very) conveniently forget is that for a market to function, there must be buyers and sellers. Every market participant has their own reasons for buying and selling, at any time, based on whatever methodology they are using, their timeframe etc.

The trick is to find a method, whatever it may be, which gives you an edge, combined it with good risk control and the right mindset, and you can make money. In my own case, my preferred method is trend following, but I also know and accept that there are plenty of other ways to make money. All I know is that trend following approach suits me and my personality.

So, when I encounter these people, I take it as a compliment, keep my counsel and allow myself a small smile. And if the same thing happens to you, just remember it is those people hurling abuse around who will be on the other side of your trades...

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