Who Breathes Easier – The Investor or the Trader?

Sure…

…asset-light…

…going with the flow…

…can strike both ways…

…care-free almost…

…that’s the image that lures one to the trading world.

Especially when the investor’s world has turned upside down, the investor starts wishing that he or she were a trader instead.

Stop.

Get your investing basics right. Your world will not turn upside down once you invest small quanta into quality coupled with margin of safety, again and again and again.

Let’s dig a little deeper into the trader’s world.

No baggage?

Sure baggage.

Emotional baggage for starters.

Cash baggage.

This one will always be there.

The trader will always have one eye on the cash component.

It needs to be safe.

It is a cause of…

…tension.

Reason is, the safest of havens for this cash component, i.e. sovereign debt, is volatile enough to disturb those who are averse to volatility when it comes to one’s cash component.

So, not asset-light.

Cash component is also an asset. It’s not light.

Sure, go with the flow. Strike both ways.

Can one say that this is a recipe for making higher returns?

NO.

Investors strike in one direction.

Investors are perennial bulls.

At least they know where they are going.

Small entry quanta make market falls work in favour of investors, over many, many entries into an underlying, over the long-term.

Do the math. You’ll see.

When one is focused on one direction, i.e. upwards here, chances of capitalising on runs are higher. The trader’s mind is always bi-polar in this regard, and game-changing runs are missed out on, upon corrections larger than the concerned stop-loss.

Care-free?

Who’s watching the screen all day?

The trader.

The investor watches the screen only upon requirement. There are investors who don’t watch the screen at all.

Images are deceptive.

Don’t go by images.

Whatever one chooses, it should ignite one’s passion.

Nothing else counts.

Let’s say you’re an investor, and you feel that you’re missing something by not trading.

Fine. Fill the gap. Sort out the basic folio, and then dabble in trading with small amounts, that don’t throw you out of whack. Do it for the thrill, if nothing else. As long as one is clear that this is not one’s A-game, and expectations are not as high as they are from one’s A-game, one might even enjoy the ride.

Let’s say you are a trader and need an avenue to park.

Yes, Equity is a serious avenue for parking.

Use it.

With one caveat.

This is not a trade.

Trading rules don’t apply to parking.

In fact, trading rules are inverse to investing rules.

You’ll need to figure this one out before moving your bulk into Equity for parking.

The investor is able to take trading with small amounts casually, and use it as an avenue for amusement.

When the trader explores the avenue of Equity for parking, its serious business, and spells doom for the trader if basics of investing are not understood.

So, who breathes easier?

One would know this by now.

Feeling

Who writes the rule-book for your market-life?

You do.

Why do you do it?

Nobody else is qualified enough.

You know yourself better than others.

Don’t you?

Thus, one feels one’s way through the markets, setting up lamp-posts and rules.

For example, I recently discover how to integrate my investing life with my trading life, in one particular market.

It takes me a long, long time to do so.

Nothing has really worked on this front.

Both lives have been getting affected, adversely, because of each other.

It’s outright frustrating and, I just sheer stop trading this market, to allow my investing life to prosper.

Simultaneously, I keep feeling my way through, trying out various permutations and combinations…

…, one of which seems to be working.

How do I know?

I’m trading again.

What have I done that I wasn’t doing before?

I haven’t been using the concept of exhaustion.

I exhaust my ability to invest, opportunity-wise.

Since I follow a small entry-quantum approach, liquidity exhaustion isn’t going to work.

Opportunity exhaustion is.

As opportunities keep coming, I keep going in, each time with small quanta, not changing anything in my investment approach.

One fine day, there is no margin of safety being offered.

I don’t feel like going in.

I am exhausted.

I shut down my investment widow…

…and then {[:-)]}, open my trading window.

Within an hour, I take a trade.

Lo and behold, integration has taken place.

Seamlessly.

All our demons are inside of us.

If one is not dying, exhaust it with feeling, even temporarily, to look after your other vital activities.

Nath on Trading – V – Make that a Hundred

81). Paper trading has limited value.

82). That’s because money on the line activates your emotions.

83). Is there a holy grail? No. Stop looking for it.

84). Small edges taken to the nth – that’s what cuts it.

85). Most advisories make more money advising and less money trading.

86). Many advisories ignore sheer basics such as risk : reward.

87). Advisories are after commission and management fees rather than your long-term benefit.

88). If you’re lookig for an advisory, look hard, and don’t be afraid to keep rejecting till you find someone who knows the game and is not greedy.

89). Everything is out there, for you, for the taking, on the internet.

90). Most of this everything is free, if you just make that extra effort to get it.

91). Disclosure laws are so strict, that you can get into the un*erp*nts of a management today, literally at the speed of thought.

92). Thus, to play the market, any market, all you need is funds, due diligence and a device.

93). Due diligence gives you confidence to hold the line.

94). Funds need to be saved first. What goes into trading is that portion of your savings which you are not going to need – at all, at best.

95). Your device needs to become a seamless extension of you. Work on your device till it becomes that.

96). The best ideas are born in silence.

97). The best ideas are also the simplest in nature.

98). Sophistication is a net-net loser’s game.

99). If you’re doing it right, and if you’re not a day-trader by profession, trading takes up only a small portion of your day.

100). Life has myriads of avenues, trading being one small such aspect. Being a trader doesn’t mean losing out on life’s countless drawing boards. Trade. Fine. Live too, and live well. Do all-round justice to your opportunity.

Nath on Trading – IV – We’ve got Stamina

61). We’re able to take many, many small losses, without flinching.

62). Only that sets us up for the big wins.

63). We don’t second guess our stops.

64). In fact, we want the stop to hit. As in, hit me, if you’ve got the *****.

65). When the trade moves in our direction, we let it. We’re doing other stuff.

66). When the trade moves against us, we let it. We’re doing other stuff.

67). That’s because we fully understand the function of our stop. It will take us out of the market, whether in loss or in profit. It’s dynamic, you see. It moves with the market as per the definition provided by us while punching in the trade.

68). We’re not afraid that our stop could be jumped. Can happen, in a panic. Hopefully, our technicals will have placed us in the right trade direction before huge and fast moves. It comes to mind that this kind of move occured at least twice in the last six years, once with the swiss franc, and once during Brexit. If we start worrying about such one-offs, we won’t trade at all. 

69). We look at the technicals, and we listen to what they’re saying. The trend is our friend. We trade with the trend, either on fresh highs (fresh lows) or on pullbacks, depending upon the conditions.

70). This is trading, so I personally don’t look at fundamentals. However, cook your curry the way you like it.

71). We might zero into tradable underlyings with screens or searches, but…

72). …we eyeball into final trade selection.

73). Yes, the chart needs to look and feel just right. All but the one tradable entity are rejected by the look and feel of the chart. The one remaining is the one we trade. If none remains, we don’t trade. 

74). Price is king. We’re into price action.

75). Indicators only indicate. Price does the talking.

76). What the price is saying will reflect in the indicator, but with a time-lag.

77). Do we want this time-lag? I don’t.

78). Thus, price action it is, for me. However, everyone is looking at the same price.

79). Therefore, we need to think slightly out of the box, to make money.

80). Edge + out of the box thinking + stamina nails it.

 

 

 

 

Nath on Trading – II – Building up on Basics

21). You started small, right?

22). Ultimately, you’re staying consistently in the green, correct?

23). Then it’s time to scale up. Slowly does it.

24). Why the whole spiel about starting small? You make your biggest mistakes in the first seven years.

25). Hopefully, you don’t repeat a mistake once it has happened, and once you’ve learnt from it.

26). However, mistakes are good, because they teach you. Nothing else can teach you with incorporation into DNA. Mistakes can.

27). No university can teach you. No books. No professor. Play the market, make the mistake, and learn.

28). A big break early in the markets is a recipe for disaster. More likely than not, you’ll blow up later, when it matters.

29). The best possible way to scale up is using position-sizing as delineated by Dr. Van Tharp.

30). The good thing about position-sizing is that it makes you scale down, when trading corpus goes below par.

31). Day trading takes up the day. You’re exhausted and are not able to do much else.

32). Short-term trading also keeps you riveted to the terminal, mostly.

33). However, position trading and longer time frames keep you in the line for whatever else you wish to achieve.

34). Market TV makes it a video game. Switch it off.

35). Trading with targets caps big-win potential.

36). When you trade, you trade. You don’t invest.

37). Successful trading means buying high and selling higher, or…

38). …selling low and buying back lower…

39). …as opposed to successful investing, which is buying low, not selling for the longest time, and then selling for a multiple.

40). Read points 16 to 19 again.

Fancy schmanzy or just plain Vanilla?

There’s expenditure and there’s expenditure.

Meaning?

Let’s say you start some work. It can be market-related, for all I care. What do you do first?

Prep.

How do you prep?

Studying up. As long as I can manage.

And then?

Courses, workshops, the deal.

Local?

Naehhh. I try to keep it national though.

International?

Haven’t required it till now for market work.

Ok. What happens next?

I hit the market concerned. Low-key at first. 

Why?

That’s when you make the most mistakes. That’s why. 

I see. Motive?

I want to learn from my mistakes and not repeat them.

Rather than from an instructor?

Of course. This is the market, remember. This is about you. Not about the instructor. This is about knowing your own shortcomings related to a particular market, and about adjusting and fine-tuning yourself to the market to trade it optimally. This is about fitting the market concerned in a tailor-made fashion into your own life without disrupting your own life. 

Wow! Well, then, congratulations. You’re a prime candidate for doing it the plain vanilla way. 

Is there any other way to do it?

Oh, there’s the fancy schmanzy one. 

Kindly describe it. 

Well, it mostly entails unnecessary expenditure along with necessary expenditure. There’s more unnecessary expenditure though. 

I see. 

One is normally too lazy to study up. Or, one doesn’t have the get-go in oneself to approach the subject on one’s own. 

Sure, can happen. 

One flips from instructor to instructor in search of the holy grail. Expensive software, international trips, five-star hotels, the whole shebang. In the end one has spent a bomb. To end up trading the instructor’s perspective. Finally realising that the markets are about oneself, and unless one is trading one’s own perspective, one is sure to lose. Or not realising this (!) and continuing to flip instructors and instructions. Finally burning out and giving up on the markets. 

Sad though. All necessary software is available free of cost on the internet. One can do inexpensive internet courses to widen one’s horizon. These can involve one-on-one instruction too. Video-conferencing. File sharing. Threads. Assessments. The works. Live-market training. You name it. All travelling and extra expenses cut out. Few hundred dollars for the whole course. 

I already acknowledged your plain vanilla acumen. I’m just trying to tell you that most others prefer the fancy schmanzy way. 

I prefer to stay in the market and not burn out. I’m in the market to make a steady income. 

Well, that you will, my dear friend. The plain vanilla way doesn’t promise any hype, but it does promise income. 

What’s bothering you today?

Get it out of the way.

Why?

Bother takes a toll. 

Focus goes away. 

You don’t wish to see your trade. 

That’s a pathetic condition to be in…

…as a trader. 

When you’re in a trade…

…you need to monitor the trade. 

How will you monitor a trade…

…if you don’t feel like looking at your screen?

What’s causing your indifference?

Bio-chemistry. 

Resulting from?

The spot of bother.

That’s why, get it out of the way.

Trade gone wrong?

Kill it.

Spouse problem?

Address it.

Child matter.

Deal with it.

Bring your environment to an immediate logical conclusion…

…if you can.

Why?

You’ll trade like a king…

…or a queen…

… whatever title you prefer. 

You’ll see clearly. 

You’ll want to open your terminal. 

Your ideology will be aligned with your trade. 

You’ll be making money. 

That’s why.