Tuesday, January 06, 2009

Undercapitalized Trading

Undercapitalized trading is hurting me right now. With volatilities so high, it's almost impossible to take positions in most markets even when they show a trade. With trend following, the game is simple: trade with an edge and keep risk low so you have money to trade when the 5 or 6 trades of the year with huge payoffs come around. Unfortunately, right now I can't take part in those huge payoff trades because of the relatively low amount of capital I have. For some trades, I would need over $100k which is twice what I currently have. So my goals are to save and raise capital over the next few months to put myself in a good position to be there when the huge trades come my way.

More and more I'm seeing that trading is not about skill. It is about discipline and being in the right place at the right time; which is also known as luck. If developing a system with an edge is skill then so be it. I believe anyone can develop a trading system with an edge. I believe that the execution of the trading system is the skill because it is a test of discipline and boredom. Trend trading is extremely boring which is the part that is often overlooked.

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