Over at Daily Speculations Victor Niederhoffer offered some words of wisdom on knowing one’s limits:
‘One of the best things that I’ve done in my own speculative career is to realize that I am a loser in various niches and to exit those forever.
I retired relatively gracefully from squash after losing for only a year or two. I did the same with fixed income, and after a loss with foreign currencies.’
‘I shudder at how active and how good one has to be at something just to try to stay above water. I would urge all who trade the markets to periodically stop and think whether they have an edge. They should decide if they’ve made money, taking into consideration all their bad luck and the rule of ever-changing cycles.
The market loves to let you make money on small capital (like they did with the trend followers and so many hedge funds) just so you invest humongous amounts on ‘the system that can’t fail’, only to take you for billions later on.’
In the comments section of the post, Alan Millhone quotes Clint Eastwood, ‘Man’s got to know his limitations.’
This got me thinking about that moment when people decide to give up and move on to new endeavours. I think it’s important to think about quitting before the event because it puts you in greater control of the final decision to exit.
In the sporting world, UK tennis player Greg Rusedski decided to retire a few months ago. Discussing his decision on a UK chat show, Rusedski expressed great humility in appreciating that he no longer had what it takes to compete at the highest level and that he just didn’t seem to want it as much anymore. The likes of Agassi and Ivanisevic are proof that players can continue to play well into their middle years but players need to have the internal drive, and flame of ambition burns at different rates for different people.
Elsewhere, another recent high profile retirement came from the world of ballet, with 38- year old Darcey Bussell exiting the stage when she was at the peak of her career. This left a lot of fans puzzled, even angry, but Bussell stuck to her decision to bow out. She commented that it was increasingly difficult to maintain the strength to get through three hour ballets, and that her priorities were shifting toward her two children. Bussell also said, ‘I think I have seen so many dancers not retire when they should have’, ‘I don’t want to start fizzling out and people wanting me to retire’ and, ‘As long as I feel good about it I have no regrets… and I’m very happy.’
When to exit a niche or life endeavour is a difficult decision to make but surely it must be better to leave on one’s own terms, rather than staying in the game well past one’s prime and potentially becoming an example of ‘how not to do it’. In trading, it probably doesn’t make sense to exit a niche until we experience a string of losses, evidence that we have truly lost our edge. In that sense, the signal to retire can be quite clear.
Returning to my own trading, I have a point of ruin at £9000 but on top of that I have decided that I will exit the game if I lose money ten weeks in a row. That would be ample evidence that it is time to move on.