I’m guilty of useless expansion.
I end up doing it all the time.
Can’t help myself, you see.
I like to keep exploring new stuff in the market.
The silver lining is, the even though I might be expanding sideways, there are two good things happening also.
There is no scaling up happening immediately. Good.
There is also a lot of discarding going on. Things that don’t work out are eventually abandoned. Great.
My issue is that I might have between 1 to 2 useless strategies in my repertoire at any given time.
These strategies are not working. In fact they are dying out. Reasons can be many. A strategy might be sound, but it might not be a fit.
For a strategy to work for you, it must be practically lucrative in the long run, and it must fit you.
By the time I realize that a strategy needs to be discarded, money has been lost. Tuition fees? Yes.
Ultimately, things boil down to a handful of successful strategies. It can even ultimately boil down to one or two successful ones.
Get there. I’m trying too. To do so, useless strategies will need to be discarded, like, now.
The problem is, you don’t know that a strategy is useless till it has hit you a few times.
Also, you don’t wish to discard something that you think might just work out for you in the long run.
Fine. Keep grinding, and ultimately narrow down your sideways expansion, till you’re only working with strategies that are yielding, and show a long-term promise of being around.
Now you can scale up. Doing so using a yielding strategy that fits is called useful expansion.
Scale up slowly.
You can position-size, and scale up using profits. This way you are not putting in extra principal. Let the strategy continue to prove itself by yielding. As long as it does so, you keep scaling up on your positions using the newly earned profits.
Why is useful expansion not easy to maintain?
We get carried away.
We might scale up too fast, and then baulk at a loss when the size of the loss is too difficult to swallow. Large input can result in a largish potential loss.
Trading is about containing loss, and letting profits run.
Scaling up too fast makes an early loss look big if we haven’t tasted the corresponding potential profits yet. Such an event can even cause us to abandon a successful strategy because we are disheartened.
Therefore, try not to scale up by putting in new principal, if you can help it.
Try scaling up on profits alone.
Position-sizing automatically controls the scale-up-scale-down factors by defining the size of a constant stop as a percentage of the principal remaining between trades.
Position-sizing makes one scale-up and scale-down on auto-pilot in a relatively balanced fashion.
Please incorporate this wonderful ideology (which comes from the stable of Dr. Van Tharp) into your trading strategy.
We’re not going for the jugular.
Or are we?
The jugular has the most copious flow.
Maybe we are then…
… going for the jugular.
However, there’s no stabbing happening.
We do everything from the inside of our comfort-zone.
We act with harmony.
We try and be non-violent about it.
What are we doing?
We’re looking to create wealth.
What makes us look?
Security. Our basic income secures us.
Boredom. Adding to our basic income has become boring.
Overflow. As basic income starts to overflow, it needs a long-term avenue in which it doesn’t demand our constant attention.
What’s the best way…
… to go about it?
Where there’s honey, there are bees.
Finance-people find you. You have money. They have investments. For finance-people, you are bread and butter.
So, you sit.
You let them come.
You’ve got discriminatory-ability.
You sift. 99% of what comes goes into the bin.
You like 1%.
You invest in that 1%.
Whatever you pre-define as your per-annum outflow into wealth-creation.
Only that much.
What’s the bottom-line?
What’s your holding strategy?
“The biggest money is made…
You’re not even looking at your long-term investment more than once a month.
You’re not interested in daily quotes.
The daily quote can say zero. You don’t care. You know that you are in the process of creating wealth, and that it’s going to take long, and within that period you don’t care if the world thinks your holding is zero, because you know it isn’t.
Ability to think differently.
Ability to see wealth in its nascent stage, and to recognize it.
You have these things.
They didn’t come for free.
You took some solid hits to earn them.
Yeah, you have what it takes, and that’s why…
… you’re going for the multiple.
You’re thinking cruise control…
… when life asks you to step in.
What just happened?
Is cruise control a myth?
Life in the ’10s is about variables.
Balance arrives, to become imbalance.
Most of us are far away from equilibrium because of our inner and outer environments.
We exist for the longest time in a poisonous state of pseudo-equilibrium.
It’s become a game of how well we cope with such state.
What’s the fine line here?
Shying away is not an option.
To achieve, one delves deep into the world.
One becomes habituated to body-chemistry being regularly out of whack.
One makes friends with one’s poisonous state of non-equilibrium.
Simultaneously, one keeps killing accumulated toxins, or pumping them out. One doesn’t let them overflow.
Exercise. Metabolizes toxins at a fast pace.
Anti-oxidants. Straight-away attack and break-up cancer cells.
Water. Dissolves water-soluble toxins and flushes them out.
Do what you’ve come to do.
Make sure you do this stuff too.
Something small goes amiss.
You still have to get your act together.
If you have lots going under your umbrella, well, then even more so, exponentially.
Life’s about permutations and combinations.
Something or the other goes astray, almost always.
Make sure you don’t.
Go astray, that is.
Explain to yourself.
Hold your act together.
The other stuff under your umbrella hasn’t gone astray.
Only the one thing has.
That’s not a bad score.
You will get a chance to set it right.
Such is time.
Meaning, take care of your other stuff.
Take care of it well.
When the time arrives, set your astray business right.
Now you’re good.
Didn’t hurt, did it?
You held your other stuff together.
You set your astray stuff right.
All came out perfect.
What more could you want?
It paid to keep your cool.
You didn’t blow it.
Worry could have blown it.
Your other stuff could have suffered.
However you were stronger.
You had learnt to live with imperfection…
… because you had also learnt…
… that time is the great equalizer…
… and that you’d get the opportunity to make it perfect again…
which you did, while you kept your world balanced…!