I played a game of "Points by Unforced Errors" today (some call it tennis, but I'm at the level where I can't say that I really earn any of my points yet). My playing partner is a fellow trader and business partner and we've been trying to get out and play in this great Arizona summer weather. It's only about 90 degrees when we play.

During the match I was thinking there are market participants who can actually qualify and quantify other, weaker, market participants who offer them "points" by their unforced errors. It would fall into the category of of prey in the predator/prey relationship, I fear.

Wikipedia's definition of an unforced error: "During play, an error in a service or return shot that cannot be attributed to any factor other than poor judgment and execution by the player."

I really can't think of another way that the great traders can make money but by taking advantage of, and relying on, the errors in judgment by other participants. So, perhaps "points by unforced errors" is really the only way someone can make money in the markets, and in many other endeavors.

Chris Cooper extends:

Unforced errors in my trading have proven very costly. For the purposes of reminding myself to avoid making them again, I've compiled a list of trading errors made recently.

For my manual trading –
1) Fat finger mistakes resulting in incorrect trade size.
2) Fat finger buy/sell mistakes.
3) Overbetting/underbetting the bankroll compared to some standard
determined a priori.
4) Forgetting to set the alarm clock.
5) Distractions at known trading times.

For my automated trading –
1) Programming bugs causing undetected deadlocks.
2) Suboptimal handling of broker downtime.
3) Faulty logic to handle some exceptional real-world trading situations.
4) Failure to reconcile broker's end-of-day positions with my own.
5) Inattention to "hidden" fees.
6) Slow switchover to redundant equipment.

Given unforced errors such as these, plus the commissions I pay, it is a wonder that I manage to make any money at all.


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