If you put a trade on, the following can happen.
There are two sources of variance in your outcomes:
1. am I right or wrong?
2. am I lucky? (did random unforecastable events help or hinder my position)
For small numbers of trades, 2 totally dominates.
There are two sources of variance in your outcomes:
1. am I right or wrong?
2. am I lucky? (did random unforecastable events help or hinder my position)
For small numbers of trades, 2 totally dominates.
This is why concentrating big in single ideas is a bad idea, even if you have a ton of conviction.
Even if you *know* you're right, unforecastable random events can easily derail you trade. (Policy change, whatever.)
And you don't know you're right.
Even if you *know* you're right, unforecastable random events can easily derail you trade. (Policy change, whatever.)
And you don't know you're right.
Raoul's "irresponsibly large" concentrated position in ETH would have been a sh!t trade even if had made money, because there's so much chance of losing money even if you're right.
You've got no right betting the farm on coin flip type ideas like that.
You've got no right betting the farm on coin flip type ideas like that.
"How can I not wreck myself if I'm wrong"
NOT
"How can I make the most money, given I know I'm right"
(You don't know you're right, bro. And, even if you are, there's still a good chance you'll get unlucky.)
NOT
"How can I make the most money, given I know I'm right"
(You don't know you're right, bro. And, even if you are, there's still a good chance you'll get unlucky.)
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