Knowing When You've Won

Marketwatch had two articles where the first half of the story was the same but the endings were completely different. In the first one, a trader starting with $35,000 grew their pot up to $1 million. He did it with options, mostly. He had some specific thoughts on cash levels and position sizing and had an insanely good result. The other trader started with $15,000, grew that to $1 million and then proceeded to trade himself into oblivion.

For purposes of this post we will assume both stories are completely true. It doesn't matter whether they were lucky or good in getting to $1 million, the fact is they got there. I would add here that just because the first guy still has the money doesn't mean his story is over. When I saw that first article, I tweeted it out and said that if it was true, he should take $900,000 off the table right away. In a similar context for how I discuss Bitcoin, if it grows into a life-changing piece of money, sell it (or at least some) and let it change your life. How much money do you have right now? If it grew by $1 million somehow in a short period of time, would that be life changing? It would be for me. In relation to what we have, that is a lot of money.

Occasionally, people get insanely lucky. There's no shame in realizing that the great thing that happened to you was luck, not skill, but you need the introspection to realize this and act accordingly. There's a good chance that the guy who went from $35,000 to $1 million was lucky. Putting $900,000 into a t-bill or the like would simply be prudent risk management. If it was skill, then he'd be able to trade the remaining $100,000 into another large sum, bank most of that and repeat. And if it was luck, he'd have $900,000 safely socked away and depending on his age, that $900,000 would either be a pretty good retirement nest egg or a great head start.

Whatever the odds that the first guy was lucky, the odds that the second guy, the one who lost it all, was just lucky are even greater.

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