Feedback from an old pro trader from Commodities Corporation:
Hi Michael – A very good friend sent me a questionnaire over the weekend regarding a proposed upcoming “advanced” trading seminar he is putting together for down the road…As I have said before and I will say again while many methods work I have yet to see any one method work for EVERYONE…Anyway at the end of the questionnaire my friend asked for a brief discussion of what I personally thought every successful trader had mastered in becoming successful. To follow is my response in the order I believe of their importance:
#1. Have a written non-subjective money management system. I personally never ever risk more than 1% on a bet and frankly risk less on most of my bets. Over my 30+ years of trading I have found there is very little correlation to the amount I initially risk in a bet and the amount of profit I gain on a per contract basis. I have no clue what the Amaranth boys were betting in the Natural Gas fiasco, but I think it is safe to say it fell in the 10-20% range. Last time I calculated betting 20% per shot it ends up at zero pretty quickly.
#2. I think prospective traders and even seasoned traders need to learn how to design a trading method that fits their own individual personality type. It is my belief that a Type A personality will find position trading quite stressful while a less aggressive personality will have a hard time swing trading. At the end of the day they may both work out from a profitability point of view IF your personality fits your method. I think it is quite possible for the very same trading method to be a big winner for trader A and a big loser for Trader B. How could it be any other way?
In conclusion it is possible to start out risking 1% and end up losing 3% just as it must have been possible to start out risking 20% and end up losing over 60%. They are just numbers!