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Don't Trade Like Cool-Hand Luke Part 2



October 11, 2012 – Comments (0)

One of the most epic challenges known to man, was when Cool Hand Luke pulled off the unconquerable 50 hard-boiled eggs in one hour. It was something considered impossible to man... but not Cool Hand Luke. 

But like the first post in this series, Cool Hand Luke would have made for one horrible trader. 

So in this final post of this two-part series, how does this incredible achievement in the folk-lor of egg-eating relate to trading? 

A lot of people trade like they would if they were trying to achieve Cool-Hand Luke grandeur. 

I got an email the other day, from a website encouraging me to sign up for their trading workshop. In that email, the person bragged about having made 100,000 trades in his life time. Now the guy can be two hundred years old and that would still be an admirable feat, but I don't even think he's over 40 years of age. Assuming he would have traded every trading day for the past 15 years, that would be the equivalent of 26 trades a day! Do I believe he did this? Not at all. 

But what he's bragging about is making that many trades in a day. Now unless your are some infamous trading algo or HFT firm, I highly doubt that 26+ trades per day is all that healthy to be doing. 

First of all, I don't even think human capacity allows for a person to be at peak performance when trading that many positions. Not only that but you are going to run up a score in commissions. Essentially if he had been trading at $7.00 a trade over 15 years (given 15 years ago the commissions were more like $30-40 per trade), just to get in and out of the trade would have cost $1.4 million alone. 

That's a ton of expenses to overcome during the course of even just 15 years in trading, and I doubt many have done that starting from  humble means. 

The Rule of Thumb... Here's the rest of the article.

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