Handling a Long-Long Trading Portfolio During a Market Correction

You’re probably laughing at the use of the term “long-long”!

Hahahahaha, I laugh with you, 🙂 !

In India, we like to get our point across without caring too much for terminology, and / or how funny it may sound. 

What I mean is, and you’ve obviously gotten the drift, that the average trader is normally long in a trading portfolio.

Now, how is the trader to deal with his or her trading portfolio and its dwindling valuation during a long-drawn out market correction?

Sure, there are many options. 

One is to hold and sit it out. 

No good. 

This is not investing. This is trading. Trading means that once a stop is hit, you’re out. Period. 

Second option – bludgeon it. Cut the entire portfolio. 

Hmmmm, that’s not trading. 

Many stocks will not have their stops hit yet. Why are you cutting these? This would mean losing your position. What if the reversal starts right now? You did the right research, you entered, and now you’ve lost your position. 

Not good. 

We’re not bludgeoning it all. 

Of course we are continuing to cut those stocks whose stops are hit. 

No question about that. 

Now comes a kind of a “pointe”. 

You’ve hit a stop during the correction. You’ve gotten out of this stock, as per your trading rules. Look for another stock with a northwards chart that is not getting so affected by the correction, but has fallen a tad so as to allow margin of safety during trading entry. 

You’ve done three things here. 

You’ve entered a robust stock. 

Simultaneously, you’ve benefited from a slight price advantage. 

Thirdly, your trading portfolio is still going. Its contents are getting robust. Come the rally, and the robust contents are going to zoom. 

You’re trading on surplus. You’re not afraid to lose till your stop. You’re not afraid to reenter. So why cut it all? 

There’s no telling about turnarounds. 

However, when they happen, you are positioned. 

Optimal positioning while trading leads to big profits.

What’s the worst case scenario?

Stop after stop being hit, and eventually you being out of the whole portfolio?

Remember, the other side of the coin promises big profits, were the turnaround to happen now, with your portfolio full of robust stocks.

Are you willing to make the trade-off?


Well, then don’t trade an entire portfolio. You’re better off trading one underlying, like an index derivative. Cut it when you like, no questions asked. 


Well, then, what’re you waiting for? Make the trade-off. Go for it!



Let if Fall to Zero, I Say

Markets are correcting. 

The correction seems to be gathering momentum. 

Long-term portfolios lose out on net worth. 

Trading portfolios get their stops hit. 

It’s not pretty. 

Should one be worried?


Have we not taken worry out of the equation?


We have. 

We’re not worried. 

In fact, we want the correction to linger. 


So we can buy more. 

How long can you keep buying?

Till eternity.

How’s that possible?

Very simple. Do you have savings?


Lovely. Do your savings grow?

Yes, month upon month, they do. I make sure of this by spending less than I earn. 

Even lovlier. Now take a very small potion of your total savings, and put it in the market. 

How small?

Small enough, such that if you were to put in that same small quantum on all off the approximately 220 days of the year that the markets are open, even then, your savings would keep growing at a representable rate. 

Ok. I see where you’re going with this. 

Absolutely. Now, suddenly, your whole perspective changes. You want your next quantum to go in. Thus, you want the correction to linger. 

What if the markets go up?

One keeps going in with the same quantum till one is getting margin of safety. No margin of safety anymore means no more entry. 

I see. That’s where your confidence is coming from.

Not entirely. You see, by the grace of God, I have made sure that my family’s bread and butter is secure before putting even a penny into the markets. 

Oh. Well done!

Then, whatever is going in, is surplus. 


The rate of entry, i.e. the size of each quantum is minuscule enough to not pinch me upon the onset of a lingering correction. 


Please note, that one gets one’s margin of safety on perhaps 20 – 30 days of the 220 days that the markets are open in the year, on average.



That means that your savings keep growing at almost their normal rate of growth, because you’re rarely deducting from them as far as your long-term entries are concerned.

Mostly. However, what if a correction lingers for 2 years or more? Even at a time like that, you’ve got the ammo. 

Ammo, yeah, ammo is paramount. Don’t you feel like spending your savings?

I spend wisely. I don’t blow them away. I make sure, like you, that I’m saving more than I’m spending, month upon month upon month. However, I do spend.

Ok, now I’ve understood how you are so confident. 

I’ve not told you about my due diligence yet.

Oh, sorry for jumping the gun.

Due diligence is my most powerful weapon. I delve into a stock. I rip it bare. I get into the nitty-gritty (I wanted to say “underpants” originally) of the management, and let all skeletons in the closet loose. If there’s something crooked, it will emerge. The internet is my oyster. Nowadays, any and everything is available online. Mostly, a stock fails my parameters within the first 15 minutes of research. If a stock  survives perhaps three full on days of head-on research, that stock could be a likely candidate for long-term investment. Then, one looks for an appropriate entry point, which might or might not be there. If not, one waits for it. One could wait even a year. Markets require patience. 

Wow. Can I now say that I understand where your confidence is coming from?

Yes you can. 🙂

Dealing with the Nag

Sadly, one’s spouse is the butt of many jokes in life. 

However, at the outset, I wish to make it very clear, that this piece is not about a joke at the cost of my beloved spouse, who, by the way doesn’t even fall under the N-word category. 

Having gotten that out of the way, what kind of nag are we talking about. 

This one’s almost a constant, and starts off as soon as your money goes on the line. 

At first it’s a tug. 

What are the markets doing?

How is your holding faring?

Let’s have a look. 

Come on, come on…

The tug is very compelling. 

You have a look. 

You see that your holding is taking a hit. 

There is disappointment. 

You shut your terminal in disgust. 

You’re trying to do other stuff, to divert your mind, but your mind keeps flowing back to the status of your holding. 

The tug has become a nag. 

This is the nag we’re talking about. 

We wish to outline a strategy which takes the nag out of your way. 

So, how does one deal with the nag?

It will be there. However it won’t be in your way. How do we create this condition?

If you can manage by ignoring, that’s just great. This might not work though. Nag-value mostly defeats ignoring power. 

Enter small each time. You will take away greatly from the nag-factor. It won’t hit you as much. You will me waiting to enter again, small of course, in the event that your holding has fallen. This is long-term investing we’re talking about. You’ve done your due diligence, and are not afraid to repurchase umpteen times as long as you’re getting margin of safety. Re-entry upon a fall in price of the underlying does not work while trading. In fact, re-entry upon a fall while trading is a strict no-no. You exit your trade if the fall goes through your stop-loss. You don’t re-enter. However, the small entry quantum during long-term investing goes a long way in reducing the nag factor. 

How do we wash away what’s left of the factor?

Do many market activities, as in, play multiple markets. After you’re done with one market, forget about it and move on to another. Mind will genuinely be distracted. Nag value will be further reduced, and greatly. However, it will still be there, minutely. 

Once you are done with all your markets, close your connection to them for the rest of the day, and only open the connection during the next market session, and that too upon requirement only. Meanwhile, you’re doing other stuff. Life has so much to offer. All remnant nag will be washed under the rug. 

You need to now just hold it together and resist the lure of a nudge in your mind to see how the markets closed, or any similar urge. You’re done for the day, and don’t you forget it. Don’t fall back into the trap, or the rest of your day (and perhaps your night too) would be ruined. Ask yourself if that would be worth it. No? Then move on. Enjoy the rest of your day doing other stuff.

You’re done already!


Bifurcation Ability – Do you have it?


Develop it asap, please.

Otherwise, don’t be in more than one market. 

However, who is satisfied with just one market?

That would leave one with a lot of time on one’s hands, wouldn’t it?

Time on hands means looking for another market, and another, and another, till one’s time is fully occupied, and one’s thirst for market activity quenched. 

With multiple markets on one’s radar, one needs to bifurcate. 

As in time and mind compartmentalisation…

…which basically translates as…

…that when you’re working on the one market, you’re not letting any overhang from another market bother you. 

If an overhang is bothering you, take two, or take ten, or take however long it takes to kill the overhang. 

Loss, depression, profit, jubilation, exuberation, whatever cause or emotion is prevailing, let its effect come and let it go. Wait for it to go. Then open the next market. The last thing you want is for the other market to be observed and analysed while there’s emotional bias from a former market. 

Therefore…market done…market closed…next market. There’s no other formula here. 

Most market people are both traders and investors. 

This is the area where they really, really need to bifurcate and compartmentalise. 


Trading and investing involve diametrically opposite implementation strategies, that is why. 

If you’re making changes within your investment portfolio, but are still in the trading mindset, you are going to make major mistakes, which will most definitely disturb whatever balance you have managed to instill within your investment portfolio. 

Similarly, if you’re looking to open a trade and are still in the investing frame of mind, you are optimally poised to botch up your trade big time. 

This is how I approach the matter. 

I do a first half – second half thing. 

The first half during which the markets are open are for investment decisions. 

Then there’s lunch.

By lunch, I forget how the first half of the day has been spent. At least, I try and forget. 

I let the scrumptious lunch help me drown my memory. 

After lunch, the second half starts, which is dedicated to trading decisions.

Strategies used after lunch are diametrically opposite to the ones used before lunch. 

This works for me. 

There comes a time when there are no more investment decisions to be taken, at least for a while. Markets become expensive, and margin of safety vanishes. One is not thinking of entries. Exits are far, far away, as this is long-term investing. Here is when one can dedicate oneself to one’s trading. One’s got the whole day for it. It’s a great situation, because the need for bifurcation between trading and investing is gone. 

Then there comes a time where no trades are developing. Lovely.

Right, pack up, take a break, let’s go for a short and sweet holiday!

Ashes to Ashes, Bitcoin to Bust


Sure, Bitcoin and all…

…everyone is humming the word.

Those who didn’t know of its existence a very short while ago, are all gung-ho about it.

Some experts are talking of a million dollars. They’re expecting it to touch a cool million per Bitcoin.

Other slightly conservative ones are talking about half a million.

Last month, someone thought it was chocolate candy that looked like a gold coin. This month, he’s just bought his first Bicoin. I think he paid the equivalent of almost USD 4000 for it.

Citizens are moving black money across borders with it.

It’s original signature exchange in Japan failed in early 2014.

An act of sabotage, perhaps?

Governments want it down.

The US will probably do everything in its capacity to stop Bitcoin from becoming the go-to currency of the future world instead of the USD.

Rumour has it that China has already imposed sanctions against it.

Well, well, well, what do we have here?

There’s a huge push and pull going on.

Who is pushing?

Launderers and terrorists, for starters. That’s where the bulk buying pressure is coming from. They don’t care about paying an extra buck to launder, or to buy weapons with. They’re applying real pressure, and the price has appropriately shot up.

Who is pulling?

Governments. Sanctions spoil the rise. A collapsed exchange enforces the law of gravity.

Where is this going?

Well, sure, who knows, but there’s a few things that one can say or even ask.

Has anyone seen Bitcoin?

What are its credentials?

Where did it come from?

Facts and not ghost-stories would be good here. Does anyone know the facts for sure?

Can one trust something whose whole exchange has once failed?

Now, with the Chinese move, God know what might happen?

Is the machine or device on which Bitcoin is stored not a target?

Where is the peace of mind? Can one sleep soundly with Bitcoin stored on one’s computer?

Bottomline is, there’s lots of ammunition in place to cause some massive landslides here.

Given that, there’s massive room for laundering and terrorism. The world’s launderers and terrorists aren’t done yet. Pressure will keep coming back in the current world situation.

It’s an ideal trading situation that has developed, both for the longs and the shorts.

Fine, trade Bitcoin. Make money. Good for you. I personally don’t trade it. Am happy trading stocks and currency instead, Those are my areas of expertise, and I don’t operate outside the areas of my expertise. However, if you’re making a killing trading Bitcoin, I’m really happy for you.

Just don’t do one thing.

Don’t get married to it.

Meaning, don’t pick it up at these 0% margin of safety prices, never then to let it go.

There’s so much ammunition that can bring it down, that one’s investment could even get wiped out during a swift crash, especially if it has been picked up on margin.

So, careful, people, careful.

Yeah, people, while investing in Bitcoin, tread cautiously. Wait for margin of safety to develop before picking up. Secure your device. Turn it off when you sleep. Back it up, if your backup can’t be hacked.


…don’t bet the farm.

Stocks and the Art of Sitting

When can you sit?

When you’re comfortable.

It’s as simple as that.

When can you remain comfortable over very long periods of time?

When you’ve bought with appropriate margin of safety. That’s when.

Not enough margin of safety at time of purchase means jumping around and tension everytime the market rumbles.

Do you want that?

Are you investing to be on the roller-coaster day in and day out?

If yes, why are you investing in the first place?

Why don’t you just trade?

Be on your roller-coaster and recognize what you are doing.

There’s nothing wrong with being on the roller-coaster.

However, there’s something hugely wrong with being on it and not know that you are on it.

Instead, you have told yourself that you’ve pickled away your doubloons safely for a lifetime.

With inadequate margin of safety at the time of purchase, nothing could be further from the truth.



It changes when there’s tension.

Due to a changed biochemistry, we make mistakes.

We sell at a bottom, or we double-up thinking it’s the bottom, only to sink further, and then we actually go and sell at the bottom.

Bottomline is, we are likely to make vital mistakes if there’s something disturbing us.

Let’s remove the cause of the disturbance, so that we can go on to discover the art of sitting.

While investing, let’s buy with adequate margin of safety.