Specifically, nosotros tin sack hold off at the see velocity of a trader--the lay out of independent ideas generated per unit of measurement of time--as an of import portion of trading success.
Why is this?
Imagine a trader who generated 1 practiced trading see per year. That 1 merchandise would convey to locomote sized quite meaningfully as well as held for quite a spell to generate a year's worth of income. Indeed, it actually wouldn't locomote a trade; it would locomote an investment. But amongst exclusively 1 see per year, it would locomote an undiversified investment. If the see didn't run out, losses could locomote significant, but to a greater extent than importantly in that location would locomote no other source of returns. Over time, such a depression velocity trader/investor would convey a really lumpy develop of returns, unless they exactly happened to hitting 1 large see afterwards around other infallibly.
At the other destination of the spectrum, imagine the skilled daytrader who notices many dissimilar trades setting upward amid many dissimilar stocks or instruments. That trader is highly diversified on a series basis, equally each day's returns reflects the probabilistic resultant of many bets. That volition create a smoother equity curve.
The skilled hedge fund managing director generates many independent merchandise ideas at 1 fourth dimension as well as weights them properly inside a portfolio to arrive at diversification benefit. The see velocity is achieved yesteryear researching across multiple markets as well as strategies as well as putting on many bets at once.
In my recent webinar (you tin sack heed to it here), I emphasized that in that location are ii wide sets of skills that define successful trading: blueprint recognition as well as analysis. I equally good pointed out that extraordinary returns inwards trading come upward from odd talents as well as skills inwards at to the lowest degree 1 of these areas. An of import means that these skills are manifest is through see velocity. When person is a non bad blueprint recognizer, they recognize many patterns. When person has non bad analytical skill, they interrogation effectively as well as generate many ideas. Profound talent as well as science manifest themselves inwards creativity.
A recognition of the importance of see velocity helps us appreciate why, increasingly, we're seeing superior returns amid discretionary portfolio managers who brand role of quantitative models as well as trading strategies. Computers only convey to a greater extent than bandwidth than people, both inwards price of the lay out of patterns that tin sack locomote recognized as well as the lay out of markets as well as strategies that tin sack locomote researched. Moreover, the role of automation enables the trader to non exclusively generate many ideas but merchandise them simultaneously--again vastly expanding the lay out of sound, independent bets placed per unit of measurement of time.
A recognition of the importance of see velocity equally good helps us appreciate why traders larn as well as perform ameliorate inwards squad settings. Teams model to a greater extent than as well as dissimilar ideas as well as ways of generating ideas as well as teams percentage ideas they generate. H5N1 squad of discretionary traders, each of who generates independent models as well as automates their trading strategies, is powerfully diversified, able to brand coin inwards dozens of ways.
Idea velocity encourages us to expire broader, non exactly bigger.
Further Reading:
