Time your Friend or Time your Enemy?

This one depends…

…on you.

How is time treated in your curriculum with regard to the markets?

Are you in a hurry…

…or is your motto “hurry spoils the curry”?

One can make any market action an extremely difficult one if one squeezes time. 

On the other hand, the same market action yields great results when time is stretched to infinity. 

One can understand this in the predicament of the trader.

Expiry is due. 

Trades are in loss. 

It seems that trades are not going to make it to break-even by expiry.

They would probably be showing a profit after expiry. 

However, time-span for validity of the trades has been squeezed to expiry. 

Hence, the trader faces loss. 

The investor, on the other hand, is invested in the stock of the same underlying, and doesn’t dabble in the derivative. 

For the investor, time has been expanded to infinity. 

The investor doesn’t feel pain from a time-window that’s about to close.

Now, let’s look at the cons for the investor, and the pros for the trader. 

The price for making time one’s friend is the principal being locked-in for that much time. 

The investor is comfortable with that. 

If not, the investor feels pain from the lock-in, and may make a detrimental move that works against long-term investing philosophy, as in cutting a sound investment at its bottom-most point during a long drawn-out correction. 

Investors need to fulfil the comfort condition before committing to infinity. 

After a small loss, the trader moves on with the bulk of his or her funds. 

Traders needs to take a loss in stride. 

If not, future trades get affected. 

The advantage of committing funds for short periods, in trades, is that one can utilize the same funds many times over. 

The price for using short periods of time to one’s advantage, however, is tension. 

One is glued to the market, and is not really able to use the same time productively, elsewhere. 

Friendship with one aspect of time works adversely with regard to another aspect of time. 

The investor is not glued to market movements. He or she can utilize his or time for multiple purposes while being invested simultaneously and then forgetting temporarily about the long-term investment. 

It is easier to forget temporarily about an investment than it is to forget about a trade. 

Over the years, I have found it difficult to combine trading and long-term investing, specifically in the same market.

However, I do take occasional trades, apart from being invested for the long term. 

This works for me when the markets in question are different, as in Forex and Equity. 

Advertisements

Breathing Space

I like to breathe…

…between trades. 

There’s something fresh about being market neutral. 

One is decoupled from market forces. 

One feels light. 

If one has just closed a losing trade, there’s hung-over disappointment. 

Forget. 

Breathe. 

Move on. 

On the other hand, if one has just closed a winning trade…

…there’s remnant euphoria. 

Forget.

Breathe. 

Move on. 

Why forget?

The next trade is the next trade. 

It has nothing to do with the previous trade. 

Also, one is recuperating, remember?

Market forces take a toll. 

Market neutral air allows the system to regenerate. 

Don’t mistake this market neutral with the other market neutral. 

Insiders speak of being market neutral when they are hedged, and trades on both sides result in an overall market neutral stance for them. 

Hedged market neutral candidates experience a double whammy of market forces. 

You’ve understood by now, that we are talking about the “not in the of the market” neutral stance. 

Should one then even call it market neutral?

I mean, one can call it sitting out, or something. 

I like to call it market neutral breathing space.

When does the neutral strictly apply?

When I don’t know if the next trade is going to be long or short.

What will the trade direction depend upon?

Data. 

Chart. 

Technicals. 

Fundamentals. 

Whatever cooks your goose. 

However, sometimes, one is on a short-short strategy, or for that matter a long-long strategy. Meaning, that one might be out of a trade, but one is waiting to go short (long) on the next one, and so on and so forth. Meaning that one knows one’s trade direction for a defined time frame. 

Well, I still like to call the breathing space between trades market neutral, even here, because the word “neutral” reminds me to keep an unbiased mind about the next entry point. 

I try to then look at the chart free from the remains of previous experience, in my search for an entry point, even though I know the direction that I will be trading.

How much time can one spend between trades?

Depends on when the next setup arrives. 

Why the hurry?

Enjoy the calm of the space.

Let it come, then we’ll see…

Looking around for an opportunity?

Or letting one come?

Does it matter?

Is there a difference?

You bet!

When you’re looking around, you could be in a hurry. You want to get it over and done with.

Big mistake.

You are vulnerable.

Entry price will be expensive.

Your adversary feels your anxiety and jacks up entry level.

Quality? What quality? You’re in a hurry, right?

Don’t be.

Hurry spoils the curry.

Let the investment come to you.

It will.

Brokers are restless. They want to sell. They’ll knock at your doorstep once they know your funds situation. And, believe me, they won’t ask you about your funds situation. They’ll ask your banker. In fact, your banker could well be on retainer. He’ll make sure that high quality info ups his retainer fee. That’s how it works today. Don’t believe me? How come so many people have your cell number? Did you give it to them? No? Information is a commodity. It can be bought for a price.

So, wait.

Block your surplus funds as fixed deposits.

Get an overdraft going for one fixed deposit.

Delve into your normal activities.

Now you’re sitting pretty.

An opportunity comes.

It’s cr*p. Broker’s hoping you’ll bite into the nonsense being sold.

You tell the broker to buzz off. Lack of hurry gives you the clarity required to act like this.

Something lucrative comes along. Price is right. You overdraft on your FD. Yeah, it’s ok to pay the price for quality with margin of safety.

You can always fill in the overdrafted amount as new funds accumulate. The nominal interest paid for ODing is called opportunity fees. It’s chicken-feed. Just forget about it.

The best investments in life are worth waiting for.

Let It Come To You

Don’t run after the investment.

Let it come to you.

Let it breathe down your neck.

You’re not hungry for it…

…but, if it’s that good…

… you might take it.

Let it reveal its hidden goodness.

Let it ignite your curiosity to look for even more than basic goodness in the investment.

Play a passive-then-active role.

Some call this the sweet spot.

I call it the sweetest spot…

… which you really want to be in, in the world of investing.

Yeah, don’t be in a hurry.

Hurry spoils the curry.

Take your time, to the extent that…

… take time out of the equation.

Give your money the best possible chance…

… to make loads more.