The One Big Thing That Sticks

We try many things…

…in the markets.

For many years do we labour. 

Strategies come, and they go. 

Some stick. 

After running through many, many plays, we find a handful sticking. 

We take them. 

Some still wither away. 

Others get bigger. 

Eventually, one is the biggest. 

Why?

You enjoy it.

You’re good at it.

It comes naturally. 

Others aren’t fun. 

You’re tense with others. 

This one, oh, this one’s another ball game. 

It just flows. 

And so do you. 

You start to scale it up, unknowingly, at first. 

Eventually, realization sinks in.

This one thing that’s sticking so well…

…yeah, this is your life’s work. 

It’s your one big thing. 

You’ve already scaled it up to a point of no return…

…and that’s ok…

…because you don’t want to turn back. 

You’re now going to toil to make your life’s big work reach its logical conclusion. 

That’s the least that it deserves, and you’re just going to enjoy the ride…

…apart from using its proceeds to see your lot and others soundly through life, and then some.

Using Doubt as an Asset

Is this really working?

Have I thought this through enough?

Is my strategy sound enough to hold?

Am I going to look like a fool?

Should I just scrap it?

What if I’d followed that other strategy, where the other fellow said he was making tons of money with? (Like hullo, just forget the other fellow, period).

Questions…

…crop up…

…when a strategy stalls, or doesn’t behave like you want it to.

Doubt is par for the course.

Doubt is good.

Keep it at good.

Control doubt.

Don’t let it control you.

I have a great strategy for when doubt crops up.

Nothing.

I do nothing.

I sit on the strategy in question, and occupy my mind with other things.

Now, two things can happen.

Either the strategy starts to work again,…

…or things remain status quo.

If your patience is over, fine, scrap it.

However, mostly, things do get back to normal.

You’ve taken your time to develop something.

Effort and sweat have gone in.

Don’t be in a hurry to scrap something valuable.

A new strategy will take long to develop. Be prepared for that.

Remember, no strategy works all the time.

You’re well served by one that works more than it doesn’t work.

Doubt serves like a stop-loss.

As doubt overshoots critical mass, you start to change things.

Use doubt as an asset.

Till it is overshooting critical mass, keep observing it, but don’t act.

A Little Bit of Manual is a Good Thing

Sure.

Auto is the motto.

Keep some pivotal stuff on manual, though.

It’ll give you something to do.

Because it’s pivotal stuff, it decides direction, or quantum, or what have you.

Position-sizing is ideally done on auto.

You can write an algorithm for it too.

Yeah.

You can take auto to the nth level and then some.

Keeping position-sizing on manual, though, for example, makes you remain in touch with portfolio expansion or contraction. Central.

In my opinion, setting risk:reward is a trade to trade thing, and depends upon the underlying chart. Hence, being manual here gives more dexterity.

Same goes for setting stop-losses.

Which auto strategy to look at, when, is by default a manual thing. It should be, anyways, in my opinion.

This adds spontaneity to life.

Spontaneity has a certain freshness to it which makes work fun.

Some strategies are better off when not looked at for days.

Manual helps here.

When an auto strategy stops working, one needs to manually fit it to work again.

If the strategy needs dumping, you’ll need to see to this yourself.

Creation of a new strategy – you got it – manual.

The manual stuff keeps you moving, and fit.

The auto stuff just goes on auto, and if that’s all there is for you, you’re going to start getting lazy.

Befriend manual, but don’t become a slave to manual.

A little bit of manual is a good thing.

We Don’t Want Anymore

There comes a time…

…when we don’t want anymore.

Why has this happened?

It’s a spin-off from our small entry quantum approach.

We’ve been buying at sale prices, with small entry quanta, each day, a quantum a day.

A groove has been set.

After umpteen failed attempts, prices break through.

An interesting thing happens to us.

Slightly higher prices start to pinch us.

As prices go even higher…

…our mood is off, and…

…we don’t want anymore.

From a strategy perspective, this is the best thing that could have happened to us.

We will not be buying as margin of safety vanishes and remains vanished.

Our want will be triggered once more, when margin of safety returns.

This has not taken place for free.

It is an indirect result of our painful sticking to a small entry quantum approach.

🙂

Factoring in Doomsday

Because of your small entry quantum, you are always liquid.

That’s how you have defined the strategy.

What happens when there’s a market crash?

Your existing folio takes a hit.

You’ve been buying with margin of safety.

Because of your small entry quantum strategy, your hit is not hitting you.

Your focus is elsewhere.

It is on the bargains that the crash has created.

You keep targeting these with your fresh entry quanta.

You keep getting margin of safety.

Suddenly you realise, that you like it.

You like being in bargain area.

You like the sale that’s going on.

It won’t always be so.

There will be times that you won’t be getting any margin of safety whatsoever.

Then, you realize another thing.

You’re not afraid of a crash…

…because…

…you are ready, to pick more.

What has empowered you?

Margin of safety.

Small entry quanta.

Controlled level of activity.

Great fundamentals.

Great managements.

Quality.

Crashes come. Crashes go.

You’ll keep buying stocks with the above criteria as per your outlined strategy, and you’ll keep adding on to your purchases with small entry quanta.

It’s not hurting you, because the money you’re putting in has been defined in such a manner.

Your mind has digested this definition, and your strategy is in place.

The market being down while you buy is a requirement for your strategy to be successful in the long run.

It is a good thing for you. It is not a bad thing.

It takes a while to realize this.

When Money goes on Auto

What does “doing well” mean for you?

Making money – does that mean you are doing well?

Not necessarily.

You could be making money, but in the bargain, your life could be out of balance.

In my world, that’s already a fail.

Ideally, I like to keep the market in my pocket, and be in some sort of balance, such that a feeling of well-being is generated.

What am I feeling happy about?

Firstly, about defining my market scope. I have outlined how I wish to interact with the market. I’ve not allowed the market to define me. That makes me happy.

Secondly, I’ve stuck to my strategy. Before that, I found my strategy. Phew!

Now you try it out.

The market shouldn’t bother you after you’re done with it. See to it. Programme yourself in such a manner. Once you’re done with the market, you can then utilise your time for other vitally important things in life. If the market were bothering you with its constant nag, you would not be able to do these things properly.

Congratulations, your life is now rounded off, and not mono-faceted.

Sticking to a winning strategy when things are not going your way is going to see you through.

I know, the urge to call it off and look for a new strategy is huge when your current one seems to be going South. However, you’ve tried and back-tested your strategy. It should hold and then some. Now, have the confidence to stick to a plan.

Notice something?

I’ve not spoken about money.

Why?

Because, mostly, money goes on auto, when these basics are standing strong.

The Stand-Out Price

You’re ready with your small entry quantum,…

…looking to add on to you portfolio. 

You’re always liquid,…

…owing to your small entry quantum strategy. 

Where do you enter?

This is not a difficult question.

Why is this question not difficult?

That’s because the stocks in your portfolio are fundamentally tested, and have been found to be sound by you.  

Fundamental soundness is a bombastic plus. 

Now comes the next question.

Where is margin of safety being offered to you?

Is it enough margin of safety for you?

Are more stocks offering this kind of margin of safety?

What, then, is a stand-out price?

You will enter there. 

A stand-out price hits you in the eye. 

It is unusual. 

It speaks of a large fall such that the level of the price draws your attention within milliseconds. 

When you see a stand-out price on the way down like this, you ask the next questions. 

Why is the price where it is? 

What has happened?

Whatever that has happened, is it a one-time thing?

Is the momentum of the fall subsiding, or mid-way, or what?

Ask as many questions as you may want. 

The answer you want to drive at is yes or no.

Yes as in you would like to use your small entry quantum to pick up the stock in question. 

No as in you would like to wait for more clarification. 

If you pick up, you’re done for the day, if you follow a one-entry per day strategy, that is. 

If not, you look for another stand-out price.