Speaker A
Boop. Okay, I've got about seven minutes here, so if it's all the same to you, I'm just going to go ahead and get started.
OpTicBigTymeR reveals how trading is gambling, the importance of discipline over intelligence, and why small accounts require high risk to grow.
Key Takeaways
- Trading is gambling but can be profitable with a disciplined, positive expectancy approach.
- Discipline beats intelligence in trading success.
- Small accounts require higher risk tolerance and acceptance of losses to grow.
- Focus on risk management and process control rather than trying to be right.
- Most stocks do not offer a trading edge; look for unique opportunities with positive expected value.
Summary
- Trading is essentially gambling, involving bets on uncertain outcomes whether in stocks or index funds.
- Successful trading depends on having a positive expectancy framework, focusing on expected value for every trade decision.
- Discipline is more important than intelligence because smart people often struggle with accepting losses and uncertainty.
- Trading is about managing risk, process, and setups rather than being right on every trade.
- Small trading accounts (under $50,000) must take uncomfortable and sometimes 'insane' risks to grow significantly.
- Embracing being wrong and taking small losses is crucial for long-term survival in trading.
- Most stocks offer little or negative expected value, so edge comes from trading unique, emotional, or mispriced opportunities.
- Trying to turn a very small account into a large sum without additional capital is unrealistic without taking high risks.
- Chasing more capital to trade with is recommended over risking too much on a small account.
- The concept of having no edge is discussed, emphasizing the importance of understanding risk and expectancy.
Chapters
- 00:00Introduction and Trading as Gambling
- 00:33Trading vs Investing and Gambling Analogy
- 01:46Money to Be Made in Gambling and Trading
- 02:28Trading Psychology: Letting Go and Accepting Losses
- 02:31Expected Value and Discipline Over Intelligence
- 03:08Risks for Small Accounts and Embracing Being Wrong
- 04:13Challenges of Growing Small Accounts
- 04:54Taking Insane Risks to Grow Small Accounts
- 05:55Trading Without an Edge and Final Thoughts
Full Transcript — Download SRT & Markdown
Speaker A
used to always hate to admit it. If anybody told me what I was doing was gambling, I'd want some like comeback zinger. Like, I'm I'm not a degenerate.
Speaker A
So, number one thing to understand is that trading is gambling. I said it. I said it. I used to always hate to admit it. If anybody told me what I was doing was gambling, I'd want some comeback zinger. Like, I'm not a degenerate.
Speaker A
individual stock. [ __ ] there's a case to be made that investing in index funds is making a bet on an uncertain outcome, and so we are gambling. Now, lucky for us, if you head on down to the Las Vegas
Speaker A
I'm a long-short equities and derivatives portfolio manager. Shut up. Just shut up. We're making bets on uncertain outcomes as traders. That is gambling. I don't care if you're day trading, swing trading, position trading, long-term investing on individual stock.
Speaker A
suite. But what I can do is make sure that the trades I'm taking fit within a framework and process that has positive expectancy. I made an entire video on expected value. Hopefully, I remember to link it in the top. It is the single
Speaker A
There's a case to be made that investing in index funds is making a bet on an uncertain outcome, and so we are gambling. Now, lucky for us, if you head on down to the Las Vegas Strip, you will see there's a lot of money to be made in gambling.
Speaker A
But that's the first thing to understand. Now, secondly, discipline beats intelligence. I can tell you from working with hundreds of different people over the years, at a certain level of intelligence, it starts working against you because really smart
Speaker A
But as traders, I can't sell you on an all-you-can-eat lobster buffet or, I don't know, a freaking thousand-dollar-a-night hotel suite. But what I can do is make sure that the trades I'm taking fit within a framework and process that has positive expectancy.
Speaker A
Trading will beat you up and chew you up and spit you out because it is no longer about being right. It's about letting go. It's about understanding that you are gambling. Understanding that every situation is unique and you as a little
Speaker A
I made an entire video on expected value. Hopefully, I remember to link it in the top. It is the single most important metric, calculation, principle you could possibly understand because it affects every decision you make as a trader from entries to exits to stop losses to trailing stops to take profits to position size.
Speaker A
expectancy. So, it is the most disciplined people that can understand that, accept that, put on risk in spite of knowing that they might be wrong and embracing being wrong. Because as soon as you cannot embrace being wrong in trading and taking a small loss
Speaker A
Everything is just a calculation on expected value. But that's the first thing to understand. Now, secondly, discipline beats intelligence. I can tell you from working with hundreds of different people over the years, at a certain level of intelligence, it starts working against you because really smart people are used to being right in all other facets of life.
Speaker A
go up. It might go down. I don't know. It's the It's the stock market. Uh the only thing that matters is that I am disciplined in the things that I can control, my risk, my process, my setups, and all of
Speaker A
Especially if they came from some other industry and they were very successful in that industry. Trading will beat you up and chew you up and spit you out because it is no longer about being right. It's about letting go.
Speaker A
If you are trading with a small account, and I mean an account under, I don't know $50,000 you are going to have to take uncomfortable risks at certain points in your career if you want to make it. I
Speaker A
It's about understanding that you are gambling. Understanding that every situation is unique and you as a little fish, a little minnow, have zero control over the outcome of your next trade. The only thing you have control over is your risk and making sure that you're structuring your trade in a way where you have positive expectancy.
Speaker A
go down 50%, you got to double your money to get back. I get it.
Speaker A
So, it is the most disciplined people that can understand that, accept that, put on risk in spite of knowing that they might be wrong and embracing being wrong. Because as soon as you cannot embrace being wrong in trading and taking a small loss and putting on risk in very uncertain moments, you should be almost like, I have zero confidence that my next trade is going to work.
Speaker A
You're never turning that $2,000 account into anything uh, remotely, you know, with with real world value, um, anytime soon. So, if you really want to grow a small account, you have to take insane risks that do not, uh, make sense based on traditional risk
Speaker A
Zero. I have no idea. I put on a trade. I don't know. It might go up. It might go down. I don't know. It's the stock market. The only thing that matters is that I am disciplined in the things that I can control, my risk, my process, my setups, and all of those things.
Speaker A
It's just the way it is. That's why you should be chasing more capital to trade with versus trying to take a, you know, $1,000 account and turn it into $100,000 or whatever. It's not to say that that's not possible. Surely it is, but you have
Speaker A
So, it is the most disciplined that survive long-term, not the smartest people. Now, number three, this one you're probably not going to hear a lot of people talk about, but it's just a fact, bro.
Speaker A
risk 1% or half of 1% of your account on a particular trade. Anyway, uh, section four, oh, yeah, you have no edge, okay?
Speaker A
If you are trading with a small account, and I mean an account under, I don't know, $50,000, you are going to have to take uncomfortable risks at certain points in your career if you want to make it.
Speaker A
There's 5,000 listed stocks on the New York Stock Exchange, roughly. Okay. 4,995 of those everyday offer very little or negative EV, expected value. Meaning the more you trade those, I don't give a [ __ ] what your strategy is on those
Speaker A
I know that the general, you know, mantra is you should never risk more than, you know, half of 1% to 1% of your account per trade. That will ensure that even through drawdowns, you don't draw down too much because, you know, if you go down 50%, you got to double your money to get back. I get it.
Speaker A
Okay? You're not going to make money long. You might for a couple weeks, couple months.
Speaker A
But, okay, brother, if you've got a $2,000 account, you're talking about $20 risk per trade at 1%. You're never turning that $2,000 account into anything remotely, you know, with real-world value anytime soon.
Speaker A
opportunity or some major capitulatory long opportunity. That is what It is in those moments that the patterns with edge actually develop because there's all sorts of emotion and mispricings and that stuff just does not happen in every stock all the time. If you're trading
Speaker A
So, if you really want to grow a small account, you have to take insane risks that do not make sense based on traditional risk metrics. It's just a fact and you're just going to have to accept that because of that you are more likely to blow up accounts.
Speaker A
trades don't look back. If anybody tells you that you need to wait for the retest, you know, wait for the breakout and then the retest. No, no, no, no, no, my friend.
Speaker A
It's just the way it is. That's why you should be chasing more capital to trade with versus trying to take a, you know, $1,000 account and turn it into $100,000 or whatever. It's not to say that that's not possible. Surely it is, but you have to take insane risks in order to do it and multiple times be risking everything on the right setups.
Speaker A
So, you have to um you have to just get in in uncertain moments, which leads back to the EV concept and understanding that you don't need to be right.
Speaker A
But you just have to, as a small account, or like I said, be grinding outside of trading to build an account that you can risk 1% or half of 1% of your account on a particular trade.
Speaker A
Winners win in the stock market. So, you don't wait for the retest. You just buy the freaking stock. You buy the strong one and it uh you know, you hope it works out. But, we really don't know cuz we're gambling.
Speaker A
Anyway, section four, oh yeah, you have no edge, okay? And this is just, I'm going to take a page out of Lance Brightstein's book here and the broken slot machine concept.
Topics:tradinggamblingexpected valuedisciplinerisk managementsmall trading accountsstock markettrading psychologytrading edgeOpTicBigTymeR
