Earlier quoted context omitted.
Hey Jbuzbee, This is what I thought as well when I was initially introduced to the idea of technical analysis and day trading. I was very skeptical. I don't want to call myself a probability expert but after studying poker theory and reading mainstream works like Fooled by Randomness, I bought into the idea that it was just a bunch of a guys throwing darts and the "winners" whom were trying to sell all their BS were…
> Being net positive 80% of all days traded with all your winners and losers falling in a relatively tight distribution -- luck can't create highly specific, repeated outcomes like that. Yes, it can. E.g. you could sell deep out-of-the-money puts and collect a $1 premium day after day, say 99% of all days. Until one day a {terrorist attack in the US, humongous earthquake in Japan} happens and you lose more money than…
I am as well-rehearsed in financial history as anyone. I have read about LTCM, Nick Leeson (I even watched the movie), etc. In these situations there was so much size being used that if any unexpected squeeze scenario occurred, those guys would move the markets and cause a horrible chain reaction.
I understand on the surface this totally looks like I'm trading in a "eat like a chicken, shit like an elephant" type of fashion. If I were in your shoes and I read "guy made x, x, x consistently and lost 20x one time!!!" I'd be thinking along the same lines. The difference is, I had more control of my outcome. It's hard to prove this and you won't totally believe me unless you are also a day trader who grinds it out and has a feel for intraday liquidity and slippage (particularly on the otc/pink sheets). I wasn't trading such a large size where I would move the market if I was squeezed out. The risk distribution of intraday scalps is not at all similar to writing naked options with unlimited loss.
It's like this: normal trade: entry signal occurs. get in. exit signal occurs. get out. the trade in particular: exit signal occurred and i chose to ignore it and keep scaling in. would there have been awful slippage? yeah but it would have manageable. in the heat of the moment on the largest loss ever, 10-15c slippage on a $4 stock massive size feels like the end of the world but it's better than riding it down 50c or a point.