If you're not able to guide people in the right path, and encourage them to take the right steps, better to QUIT talking. It's my humble submission.

Discouraging people has never been so easy. But, showing them the right way, helping them acquire skills, is very very tough.
Also, if you're reading this, understand this first.

Trading and Investing should NEVER be undertaken as a "for a living" kind of a full time profession unless you have a steady inflow of cash through other means.

Have a job. Keep building skills and learning.
Holding on to a day job or other businesses that bring in money frees you from the pressure of making money in the markets - which is the NUMBER 1 source of stress that leads to making impulsive decisions.

Such decisions usually lead to huge losses.
You think making money with the click of a mouse and a punch of a key is easy? It's easy once you have crossed the difficult phases. But to cross those phases, you need to put in the hours of learning, disciplining yourself, and becoming someone of steel like resolve.
So, ignore the naysayers.

But don't develop ideas like "I can become a millionaire in 3 years" or such unrealistic endeavors.

Set realistic goals. 10 years is a good horizon to become a skilled trader at taking money from the market.
Spend your first 10 years (while having a job or other income/cashflow sources) acquiring the skills to consistently carve out your edge.

Spend the rest of your life after that milking your edge.

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More from @theBuoyantMan

14 Jan
It looks like every symptom on Google search leads to cancer.

So, when you have a symptom that Google screams CANCER, should you be afraid?

Before I answer that for you, let's talk about Occam's Razor and how you can use it to simplify your life.

Let's dive in. 👇👇👇
1/ In the early 1900s, two physicists studied space and time and arrived at a similar conclusion: things tend to go a little bonkers within the space-time continuum.

Ex: The closer we get to moving at the speed of light, the more we slow down.
2/ Both the scientists arrived at the same results through their equations & derivations. But both had different explanations.

One suggested that the phenomenon was due to the changes that took place within "the ether". Another didn't refer to the ether at all.
Read 31 tweets
13 Jan
Stories like these are why most people start a business.

And they are all wrought with survivorship bias.

Be very careful while getting inspired by such stories. Always ask, "how many edu-businesses started with Aakash and failed?" before you consider starting one of your own. Image
I am not discouraging you from starting a business.

By all means, start a business. That's one of the ways to the promised land of wealth.

But don't start a business because you're inspired by the success stories on media.
No founder comes up to media to discuss failure.

Failure stories also don't work that well commercially and don't provide enough fodder for media ratings.

Nobody discusses failure publicly. Very few are transparent enough to do that.

So, what you see is filtered information.
Read 25 tweets
12 Jan
When you break down the lives of extremely successful people, you find that their success didn't come from an earth shattering break-through.

Rather, it came from obsessing about a simple idea, fanatically.

Time for a thread about one such idea. 👇👇👇
1/ During world war II, a eleven year old kid checks out a book from the nearest library. The book's title was "1000 ways to make 1000 dollars".

After he reads that book, he makes a statement that by the time he was 35 years old, he'd be a millionaire.
2/ By the age of 35, his net worth was roughly 7-8 million dollars. The library was Omaha public library. That kid was Warren Buffett.

How he got there is an interesting story.

As soon as he reads that book, he decides he should have 1000 dollars before he finishes school.
Read 23 tweets
11 Jan
To avoid this, do a monte carlo analysis and find out the probabilities of range of drawdowns and work with leverage on your system accordingly.

For ex: a system I trade currently, has a historical maxDD of 4.76% and recently it hit a maxDD of about 5.5%.
On conducting monte carlo analysis of the system, I understood that the probability of maxDD to be below 5% is only ~3%.

There was about 61% probability of the maxDD to be between 5-10%

and ~2% probability that it could be around 20-40%.

You need to be aware of these.
Once you know the odds of a certain range of maxDD happening, then you can confidently deploy your strategy.

You'd also face drawdowns that lie within your comfortable range instead of being misled by just the historical maxDD as it happened in the series of trades historically.
Read 4 tweets
11 Jan
Systematic Trading, backtesting, etc., may sound like a current generation fad, but they are clearly not.

As far back as 1990s, several big funds, quant funds have used backtesting/exploration, etc., to develop systems to trade.

Only recently it has become viable for retail.
Until late 2010s, we didn't have faster internet speeds, access to better data, low cost brokers, access to ease-of-use programming languages/tools to backtest strategies thoroughly.

MATLAB was complicated. Excel was limited without VBA. VBA was not everyone's cup of tea.
Python going mainstream as a programming language alongside R programming made it possible for many people to start backtesting their ideas.

And proliferation of several helpful tools/libraries in Python has also helped several people move fast in backtesting.
Read 5 tweets
10 Jan
One of the parameters you use to understand your trading strategy performance historically before deploying it is called the RoMaD.

Return over Max Drawdown.

It's essentially (annual return % / max DD % )

Let me explain each part of this.
Average return % :

If your system started with $100,000 in 2010, and ended 2020 with $200,000, that's a 7.18% annual return over 10 years.

Maximum Drawdown % :

If portfolio falls from 150k to 120k, that's a 20% drawdown. Amongst all such drawdowns, maximum value is taken.
Return over Max Drawdown will then be

7.18% / 20% = 0.359

The RoMaD value is expressed as a ratio.

*This helps answer the question*:

Am I willing to accept an occasional drawdown of X% in order to generate an average return of Y%?
Read 6 tweets

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