A lot of people start trading, without actually understanding the theory of trading. I’m talking about some basic concepts like:
- Understanding that trading is a zero-sum game (relative to a benchmark), and a negative sum game if you include transactions costs.
- So for you to actively trade, you need to have some kind of advantage in a zero-sum game. What is your advantage?
- Understanding the difference between good trading and gambling.
- Developing good habits and thought processes.
- Discussing approaches to trading.
- Understanding the power of diversification and carry.
I will focus on developing these ideas in the next few months. Here are the first of what will probably be dozens of posts on my trading philosophies: