From The Mathematics of Money Management: Risk Analysis Techniques for Traders by Ralph Vince, pp xv:

Cutting the fat out of the market requires more than an understanding of

money management concepts. It requires discipline to tolerate and endure

emotional pain to a level that 19 out of 20 people cannot bear. This you will

not learn in this book or any other. Anyone who claims to be intrigued by

the "intellectual challenge of the markets" is not a trader. The markets are

as intellectually challenging as a fistfight. In that light, the best advice I

know of is to always cover your chin and jab on the run. Whether you win or

lose, there are significant beatings along the way. But there is really very little

to the markets in the way of an intellectual challenge. Ultimately, trading

is an exercise in self-mastery and endurance.





Speak your mind

4 Comments so far

  1. William Hansen on December 28, 2010 6:22 am

    Bravo, that is why you are you are often both mentally and physically exhausted by 4pm.

  2. jeff watson on December 28, 2010 9:06 am

    Best meal of 2010 on this site.

  3. Gangineni Dhananjhay on December 29, 2010 2:29 am

    That is a great myth brought to light. Even in the stockbroking community also believes in this wrong notion of intellectual challenge of markets !

  4. Alec Misra on December 29, 2010 6:01 am

    Bump to that. But even the sweet science has its intellectual side. This still leaves us having to resolve the issue of money management and optimizing position size.
    It seems to me - re my earlier comments in the Keynes-Hayek thread - that there is no such thing as “optimum position size” except as it is deducible aposteriori. This is for the reasons of non-stationarity which I discussed previously.
    In this (aposteriori) case the optimization process is always simple: one should be 100% invested when right and have zero investment when wrong. Given the problem of non-stationarity (what the chair has referred to as “ever changing cycles”) it is not obvious what the correct sizing principle is apriori. I do not believe there is a single rule and hence there can be no objective optimum.


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