Tag Archives: #EntryQuantum

Let if Fall to Zero, I Say

Posted on by
Reply

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?

Why?

Have we not taken worry out of the equation?

Sure. 

We have. 

We’re not worried. 

In fact, we want the correction to linger. 

Why?

So we can buy more. 

How long can you keep buying?

Till eternity.

How’s that possible?

Very simple. Do you have savings?

Yes.

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. 

Right. 

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. 

Great. 

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.

Really?!

Yes. 

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

Posted on by
Reply

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!

🙂

Poker and the Markets

Posted on by
Reply

Professional poker is not a gamble, when one takes a large sample-size of many, many hands into consideration. 

On the other hand, non-pro poker is more likely a gamble. 

So, what’s the difference between professional poker and non-pro poker?

Strategy.

Players make “mistakes”. 

Mistakes cause losses. Lets define “mistake” here as anything that causes loss. 

Winning players strategize in such a manner, that their mistakes make them lesser than average losses, and sometimes, no losses at all, but even a win results. 

Reads, bluffs, meta-game, what have you,…

…the reason the player is a winner is that he or she is winning even with hands that would normally cause a loss.

Also, when the pro senses a winning hand, the pro bets big because the odds are in his or her favour, and the pro would like to capitalize, given the odds.

A few big wins coupled with many small losses, whereby the sum total of all losses is lesser than the sum total of the wins – that’s a winning combination. 

Let’s just take this element of the winning combination, and see how it’s implementable in the markets.

Market play means mistakes. 

Almost all the time, we’re making mistakes while we’re attempting market action.

However, because of our due diligence, we make intelligent moves too. 

Our intelligent play wins us money. 

Our mistakes lose us money. 

How do we let our mistakes lose less money?

By having a very small entry quantum each time. 

How do we allow our intelligent moves to win big?

By not nipping a winner in the bud. Also, by putting money into the winner when it dips, and at an appropriate entry level.

What do we have here, then?

Many small mistakes, and a few big wins, whereby the sum total of the mistakes is lesser than the sum total of the wins.

This is the same winning combination we discussed above.

Voilà.

🙂

I Got the Feeling

Posted on by
Reply

What feeling?

The feeling of value-creation – that’s the feeling we’re talking about. 

When can one create value?

When there is value…

… and one sees it,…

…upon which one has the courage to act…

…and make that value one’s own.

This normally happens during and after a correction. 

Therefore…

…a correction is not a cause for depression.

Please understand that and please incorporate that into your DNA.

A correction is a time for action.

You go about adding value to your portfolio, again, and again, and again, as long as the correction lasts, and after, till bullishness sets in beyond your comfort level.

How can you keep on doing this?

This can be achieved by keeping your entry quantum small enough each time. We’ve been over that many times, and only recently, we went over it very thoroughly. 

So, the markets are falling, and you are going on and on, adding value. To be able to follow through properly, your system needs to be fully convinced about what you’re doing, and that’s why, I ask you again. 

Do you have the feeling?

Do you have the feeling that you’re creating value and adding it onto your holding?

Keep doing so, till the feeling persists. 

Stop, when the feeling is gone. 

Save, so that you have the resources to go on and on adding value. 

Enter small, so that you can enter many, many more times, perhaps adding even more value the next time. 

Be sensitive towards when the feeling comes and goes. 

Soon enough, during a burst of bullishness, you’ll see how this knowledge translates into a burgeoning portfolio.