Just added a wonderful site to my blogroll. It’s called The Financial Philosopher, and it does what it says on the tin exceedingly well. Highly recommend a visit.
PS – I’ve deleted Dismally from my blogroll, as David stopped posting on the site when he fell ill and it hasn’t been updated since. I hope he is well.
The life of the undercapitalised trader is fast dawning on me.
Assuming I continue to break-even trading, and based on known general expenditures averaging around £400 a month, I will reach my cut-off point of £9000 in around six-months. In reality, I will also get hit by unknown expenses, so lets reduce that to four months. It isn’t very much time and yet I do not feel any anxiety. I believe I have given it and am giving it a fair shot. And, to end on a positive note, it ain’t over yet!
Behavioural road-map score: 9 out of 10.
Again, no trading in these choppy waters. Importantly, while I spent some time looking at the markets, I felt no compulsion to trade. My rationality appears to be somewhat cyclical so I doubt it will last; the trick is to be ready for the turn.
Monthly stats to follow.
Behavioural road-map score: 7 out of 10.
I didnt’ trade this week but general expenses continue to drag down my performance.
Indeed, while the recent p+l negative prints in recent weeks make this look like my darkest period, this is not really the case as my equity is being pulled lower by expenses rather than consistently poor trading results. Such is the life of a woefully undercapitalised trader.
I have altered my risk/return profile hoping to generate larger, lumpier returns at the expense of smaller week-in-week-out profits. It will take a few months to see if this approach is more rewarding.
Wishing all traders navigation through these tumultuous water.
‘To have achieved one’s ambitions, or to reconcile onself to one’s limits, it is a life’s work.’
‘However many doors you lock, someone will always get in.’
- Benjamin Disraeli
Trading: flat (after paying for car insurance and various other expenses).
Behavioural road-map score: 7 out of 10.
Last week, I entered into a highly risky, long equity position. This was not a wise move and I reduced this to a more manageable stake shortly after. At the end of the week, my currency trading losses had been offset by some extremely astute buying of equities on the dips (sentence to be read as a joke about hindsight).
The ups and downs of the market give everyone the opportunity of appearing intelligent, if only for a while.
A long flight gives Jason Shapiro the time to do some thinking about his journey as a trader:
I have been involved in investing and trading the global markets for 18 years now. I’ve really never done anything else, never wanted to do anything else, and through thick and thin, which included more than one trip to the welfare line and some really cool sports cars, never tried to do anything else. For at least seven of those 18 years the money I have been trading has been 100% my own, and for many of those years nearly all the money I had. This has given me a different approach from most, since trading other people’s money while earning a 2% management fee or while taking in a nice salary while you hope something good happens can give a level of comfort I was not blessed with coming out of the gate. Whenever someone asks me how to learn to trade my response is that it’s easy to learn — take every dollar you have, put it in a brokerage account, put it all on the line, and I promise you will learn very quickly how it works. I don’t mean to be glib. It’s just that this is exactly how I did it so I know of no other way.
From Daily Speculations, my favourite web site … okay, second to Google.
Trading parallels and insights are to be found everywhere.
From Goethe’s Way of Science: A Phenomenology of Nature, David Seamon & Arthur Zajonc, University of New York Press, 1998:
Goethe emphasized that perhaps the greatest danger in the transition from seeing to interpreting is the tendency of the mind to impose an intellectual structure that is not really present in the thing itself: “How difficult it is…to refrain from replacing the thing with its sign, to keep the object alive before us instead of killing it with the word.”(1) The student must proceed carefully when making the transition from experience and seeing to judgement and interpretation, guarding against such dangers as “impatience, precipitancy, self-satisfaction, rigidity, narrow thoughts, presumption, indolence, indiscretion, instability, and whatever else the entire retinue might be called.”(2)
Yet Goethe argued that it is not enough to train only the outer senses and the intellect. He maintained that, as a person’s abilities to see outwardly improve, so do his or her inner recognitions and perceptions become more sensitive: “Each phenomenon in nature, rightly observed, wakens in us a new organ of inner understanding.”(3) As one learns to see more clearly, he or she also learns to see more deeply. One becomes more “at home” with the phenomenon, understanding it with greater empathy, concern and respect.
[1.Goethe: Scientific Studies, p. 275.
2.Matthaei, Goethe's Color Theory, p. 60.
3.Goethe's Botanical Writings, p. 235.]
“Events that models only predicted would happen once in 10,000 years happened every day for three days.”
“Wednesday is the type of day people will remember in quant-land for a very long time. Events that models only predicted would happen once in 10,000 years happened every day for three days.”
“Our strategy is fine. We were just hit by a sixteen-standard-deviation event.”
“Then it didn’t happen: the universe isn’t old enough for even one sixteen-standard-deviation event to have ever happened.”
These various quotes highlight the problem with putting too much faith in the past. The market has followed one of an infinite number of paths to get where it is today. Despite our best efforts, we cannot model or account for the unknown future with certainty; that would seem to be the only certainty. History does seem to suggest that risk is the partner of reward, and I, along with others would do well to remember this.