This piece dropped into my Twitter feed courtesy of Steven Goldsmith who runs the AlphaMind podcast. You don’t need to be on Twitter to read the thread just hit the link and it should open.
What interested me about this thread were the comments as they display the dichotomy that exists within Twitter and by extension within the trading community. Half the replies were along the lines of you can only do this by completely ignoring prudent risk management and getting lucky which is true. But the traders who made these remarks would probably swap their returns for the year for an $18.2M payoff so there is undoubtedly a degree of envy and churlishness to their remarks. They also conveniently ignore the fact that the author acknowledges that he has an appetite for risk and volatility that others do not and also honestly admitting that he doesn’t know whether he would have another year like this in his trading career. So there is an acceptance of the hand that he was dealt and he doesn’t come across as some blindly optimistic muppet who got lucky with GME and then proceeds to tell the world how it is done.
The other half consisted of things such as this is returns porn, compounding is the 8th wonder of the world, this is how its always done (only in la la land) to a somewhat bizarre remark that this trader has 1000% years all the time and we are now back on the delusional bullshit express.
To get a sense of the stocks that were traded and their weekly returns that might enable this sort of leveraged trading to succeed I generated a few charts.
As you perhaps would have expected TSLA has had some remarkable weekly performances which would have enabled a highly leveraged short-term trader to do well. However, you would still have to be able to manage the occasionally 20%+ weekly drawdown.
This does raise the question of what can be learnt from these sorts of experiences. The most obvious is that there are several different ways to trade but all seem to have a fundamental basis in fitting that method to the trader and having the correct psychology to stick with your method. From my perspective, all traders have outlier years both good and bad some people trade differently and some people get lucky. If you are in the game long enough you will experience episodes of both. However, the proof of your success is not in the returns from an outlier year it is actually in the following year as you find out how much of your money you can hang onto.
