Monthly Archives: November 2006

Steven Seagal teaches trading

seagal.jpg

I have just watched Steven Seagal in ‘Out For a Kill’. Don’t ask me why; please just accept that some actions cannot be explained. The movie reviews say it is a terrible film with poor direction, a bad script and even worse acting, and the reviews are right on all counts. However, Mr Seagal does impart some sage trading wisdom when when he quotes an ancient Chinese proverb on the subject of revenge:

‘Before you set out on revenge, you first dig two graves’.

Road tax gets paid

tax-disc-edit.jpg

I have finally paid £100 (approx) for a 6-month renewal of my car’s road tax. Even though I hardly use my car these days, this minor transgression was starting to burn on my conscience. The other outstanding ‘conscience’ expense is a couple of pounds to my local library; their photocopier kindly gave me unlimited free copies when times were particularly hard. I will pay up the next time I visit the library. These transgressions may appear small, but I like to live with as clean a sheet as possible as I believe one’s character is moulded in the margins of life.

Generally, I find it difficult to take money out of my trading account for items like the road tax license (and harder for entertainment expenses) because I harbour the deluded belief that ‘I have a special power to make the money grow’ if I keep it invested in my fund. Indeed, I have previously foregone the simple pleasures of life for the sake of my fund, scrimping and saving wherever and whenever possible, but I would only proceed to squander this capital in a few misplaced trades. Every time I did this I would look back with hindsight and regret not having spent the money on living a less frugal existence, instead of gambling it away.

Because my pot is so low I realise I cannot be generous to myself, but when times are good I will make greater effort to set a aside a little money for general living. I realise this is important. It helps with ‘balance’.

Validation and self protection

One of my favourite articles in the blogosphere this month is this short piece from Brett Steenbarger’s Traderfeed blog, where he discusses the danger of using trading to fulfil other emotional needs, including validation:

“Money is the rationale for trading, but it is not the only motivation. Traders also trade to make themselves feel good, to validate themselves, to avoid a 9-5 job, and so much more.

This is truly the source of most problems with “trading discipline”: what we need to do to make money conflicts with the other needs that we impose upon trading.

If we bring a host of unmet emotional needs to the perfect trading method, we will inevitably sabotage that method. A rich and fulfilling life outside of trading might just be the best trading strategy of all.”

I have added ’seeking validation vs making money’ to my road map as I suffered from this problem in addition to my other gremlins. It wasn’t as destructive as the addiction problem, but I did find that the more I traded the more I asked of trading, to my detriment.

I am aware I have been guilty of so many wrongs and it is shameful because I came to trading with a clear head. To protect against future relapses – and they will come – I have transferred roughly two-thirds of my capital from my trading account to my bank account. This should act as a kind of extreme stop-loss or fail-safe mechanism in case I get repossessed by destructive trading impulses.

Expenses

When I started this blog I said ‘I have £3500 left in the pot’. From this pot, I must draw funds to pay for expenses:

I have just treated myself to a long overdue haircut, setting me back £7.50. I usually get my haircut once a month but I had left it for well over two months and was starting to look more and more like Wolverine from the X-Men. My mobile phone bill and internet connection add a further £35 to the monthly charge. Then there is roughly £40 a month for petrol costs and £31 for gym membership. On top of these monthly fixed costs are my discretionary expenditures on entertainment, and then there are the yearly charges such as council taxes, road tax (unpaid for two months now, but I hope to pay it shortly), MOT, etc. On the original £3500, these charges tally to around 10% a month. It is said that small leaks sink ships; I realise that I am in a small boat with a large hole. Precarious times indeed. I shall press on.

PS – My trading results are reported after expenses.

Week 4 FX trading results

Perhaps my best week so far. I returned 1.7%, my worst performance to date.

The paradox is resolved by the fact that I felt I had greater control over my emotions and actions through the week. In an effort to preserve my equity I have started starving the less profitable element of my trading approach of capital, and even though the gods of probability were less generous than they have been in previous weeks, I didn’t try to ‘force’ a result. This is how I believe it should be; that is, in the short-term the trading result should be irrelevant, a mere by-product of one’s actions and behaviours.

Nevertheless I am only going to give myself a score of 8 out of 10 for following the road map. I have made efforts to improve diet, exercise, and to better connect with reality, and I believe I am making steady progress with respect to strengthening my trading discipline, but as I have noted previously, I am yet to be tested by the market. It’s true that I feel I am a little stronger, but my gremlins could be quietly regrouping in a dark corner of my mind, biding their time and waiting until I am exposed at my most vulnerable, before striking out with a vicious ferocity. History of my past behaviour tells me to keep a vigilant guard. Profits are good but I really need to look a loss in face and see how I deal with it. When I am tested in this manner only then will I know what I am really made of. Until then, I just have to admit that I do not know myself all that well.

PS – The meaning of the picture is less obvious than the previous selections in my ‘trading results’ posts. I chose the image to represent our endless quest for knowledge and acceptance of the idea that our understanding of most phenomena will forever be incomplete.  

Rain in my heart

An interesting programme is airing tonight at 9:00pm on BBC2 (UK). It is called ‘Rain in My Heart’, and is described by the Radio Times as follows:

‘This is a shatteringly powerful programme. Veteran film-maker Paul Watson takes an unflinching look at the stories of four alcoholics undergoing treatment at a hospital in Kent. We meet addled souls like Mark, 29, who drinks two bottles of vodka a day, turning the whites of his eyes as yellow as cheap custard and racking his body with shivers. (“It’s like watching some poor animal in distress,” says Watson.) Overseeing the alcoholics’ care is the saintly Dr. Gray Smith-Laing, who observes calmly, “everything we do here is too late: we’ve missed the boat.” It’s a bravura piece of film-making, with jagged editing that jumps around in time and space but delivers moments of poetry. As a portrait of lives in ruin, it’s hard to beat.’

I will watch it to better understand the life-destroying consequences of addiction.

Monsters within

Jekyll & Hyde is a famous story of polar behaviour, of the notion that ‘every man has two aspects within him – good and evil – which constantly wage war upon him.’ (Wikipedia)

In the tale, Dr Jekyll uses a potion to transform himself in to a monstrous Hyde, who proceeds to commit various hideous acts. Alas, Jekyll cannot control this monster of his own making. Even though the doctor is conscious of the likely consequences of the transformation, the desire to become Hyde grows ever stronger and the point of no return is passed as Hyde consumes Jekyll. The story does not end well.

I think everyone has a Hyde to their Jekyll. In my trading, this dual is essentially between the rational and the viscerally irrational.

Additional relevant quotes:

We are what we repeatedly do – Aristotle

When you act like the barbarian, you become the barbarian – Niles, quoting a young Frasier, in the television series ‘Frasier’.