Tag Archives: #positionsize

Constants

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Waldermort…

…overplayed his hand.

Thought he had the nuts…

…and bet the farm.

Turns out…

…that the adversary’s hole cards…

…plus the flop, turn and river…

…are leading to a full house.

As opposed to Waldy’s…

…ordinary nut flush.

Waldy is oversmart and a half.

Backfires at times.

This one has backfired at the worst possible time.

Only one result.

Waldy loses…

…everything.

Reserve status.

Serious player status.

Reputation, if there was any.

Loyalty, which was abundant from former allies, but is now…

…not even zero, but minus.

What more can one lose?

Whatever one can. It’s lost.

When this is over, a new methodology of doing everything business and financial will have emerged.

Meanwhile, a few constants remain.

There are areas in the world, where there is growth.

And will be, for the next 25 years.

Like India.

Semblance of stability?

Yes.

Integrity?

Yes.

Win-win attitude?

Yes.

Loyalty?

Yes.

Balance?

Yes.

Clout?

Yes.

Consumption.

Yes.

Period.

Buy India during this fall.

As long as the fall lasts. One year. Two years. Three years. No one knows.

What one also doesn’t know is whether India will give this buying opportunity again.

So, buy India.

Even if it means that you get fully invested during current fall.

That’ll be just great.

Magic

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Sure, …

… nobody said this was a bottom already.

No signs of a bottom.

For all you know, the real correction just started.

So, everyone is asking, …

… why in the world a buyer is buying …

… now.

Confused? No need to be.

First up, please understand, that money enters the market in a planned fashion when position sizing rules are in place.

Oh, there’s one more safety rule.

In a day, only so much goes in, in total.

Let’s say what you are referring to as a bottom comes within, hmm, two days, one day, four hours, one hour… ,

… whenever it comes.

Do you actually believe and / or have the guts to get fully invested in that minuscule time-frame?

Let me answer that for you. NO.

Why am I so clear on this?

Moving big money in one shot when the whole world’s pajamas are falling, and watching it possibly become half in a few days will most likely lead to neurosis and / or psychosis.

It is mentally digestible to keep buying at levels as per the entry quantum allowed by one’s position-sizing algorithm.

Though the overall market or index or sector benchmark might not be signalling a bottom, individual stocks hover around correction levels, threatening to recover from there.

We let them hover.

If they are not declining further from a correction level after a bit, we pick up one lot.

What’s the lot?

It’s a function of one’s networth at that point.

What function?

You decide. Yes. Your decide your own position size at each point thus, as per a mathematical calculation. You can decide to programme this function, for example, in a manner that you go in more when you are winning and go in less when you are losing. Or vice-versa. As per your personality and risk-profile. You call the shots. You are the master of your money and journey.

As time goes by, and as the correction deepens, you have lots of lots in. Ideally, you get fully invested before recovery. Compared with trying to move in fully at the exact bottom, well you might get lucky with the latter option, but it will burn your nerves, and resulting psychosis can last longer than when rational decisions will need to be taken. Not worth it. Position-size, entry quantum, going in bit by bit – this is what our nervous system can handle well without getting damaged. Markets change within months, perhaps weeks, and…

… when the magic happens, you deploy your exit strategy, whatever that is. Be rationally around to do so.

Or, simply, don’t do anything except watching the magic, …

… of a low buying average develop into a multiple.

Soil-Conditions

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Hey.

The king wears…

…no clothes, …

…and doesn’t have an idea…

…as to what the adversary is wearing.

The latter, however, is aware of the former’s wardrobe malfunction.

Maniac versus potential fanatics, which is capable of a rational reaction?

Neither?

Probably.

It might seem though, perhaps correctly, that the former is exhibiting fanaticism.

Everything is a lie.

Over-reaction : huge.

Underlying cause : none visible, yet. Actually, adversary will now scramble to create underlying cause, even if it didn’t exist. Its leader is eliminated. One can’t expect reasonable reactions from a nation now one in anger. Anger as in, how dare you? Our guy might have been a demon, but who the hell are you to eliminate him and incite us to take over our own land. We might or might not want that, but WHO THE HELL ARE YOU? WHO ASKED YOU?

Status : the hornet’s nest has been disturbed. Deed is done. This blunder might well undo the king, unless he has planned to print his way through, which then will accelerate undoing his economy, which in turn will also undo the king. All arrows are promoting towards king – exiting stage – soon.

In this turmoil, world pays tax. Oil shock is upon us.

If one was in the adversary’s boots, one would have also sealed off Hormuz. What’s the surprise? Meaning, if one is surprised, where were your think tanks? Are they low IQ? Stupid? Non-existent? Probably a mix of all three, if that is possible. I’ll tell you why there is surprise. One grossly underestimated the adversary, who was in a state of preparedness to be able to seal off Hormuz in less than ten hours. That’s why there is surprise. Wars are won and lost because of the element of surprise.

Meanwhile, oil shock means mostly all components of the stock markets go down. Fall gains momentum. As value buyers, we are on high alert.

One is not rejoicing about what’s happening. War is terrible. Brings destruction to all involved. Acknowledged.

What’s happening is a stone cold implementation of entry strategy.

Staggered.

With small quanta. [Each quantum a function of one’s networth at that moment. Algorithm of that function to be decided by oneself.]

Wherever and whenever value is seen.

For as long as it’s seen, …

…or till liquidity gets exhausted.

When one enters at deep value, one has already made money.

It’s just that the world will stamp its approval during times of euphoria, which is when the money will show, as in the sapling having grown into a plant, or a tree.

That’s fine with us.

We absolutely ok with just keeping on planting sapling after sapling in the right soil conditions.

Opportunity

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Knock knock.

Nobody home.

See you, bye. Maybe never.

Knock knock.

Come in.

This is the requirement.

No funds.

Bye.

Knock knock.

Hey. Funds not a problem.

Guts?

What if I lose?

Bye.

Knock knock.

I wish to invest and the risk is digestible.

Ok. Pull the trigger.

Should we wait for a better price?

Bye.

Knock knock.

Let’s pull the trigger.

Ok.

There.

Bye.

Hey, it’s been a month and I’m up 10%. Let’s cash out.

Ok. Bye.

Knock knock.

This time I’ll let my profit run. The last one doubled in 6 months, but I’d cashed out after a minuscule rise.

So you’ve learnt how to sit?

I keep a lookout for you. If I’m not home I get alerted to your presence, so that I can act in time.

Then, I always maintain ample liquidity for you.

The amounts I put in make my risk digestible, looking at the total size of my portfolio and liquidity.

Once you knock, I’m not afraid to pull the trigger anymore.

I’ve learnt to let multibaggers develop. I don’t nip them in the bud anymore.

Wonderful. Now add cost-free-ness to your repertoire.

Why?

It’ll trick your mind into holding your multibagger eternally, so that it is given the chance of becoming a megabagger.

Will do, thanks, cost-free-ness won’t cost me anything, right?

Not a penny.

A Little Bit of Manual is a Good Thing

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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.

Dance the Bawwdy Music!

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..dance the body music

makes you feel so happy

dance the body music

music makes you happy

hear the music play

feel your body sway

hear the dj say

oh what a big smash big smash

dance the body music…

 

Osibisa, was it, late ‘70s?

Yup. 

What an cool swingy number, sung by an unforgettable band!

Disco beat. Rhythm. Easy peasy lyrics. Synth. Floor’s going crazy. Song’s all over the people. People are all over the song. 

Euphoria. 

Why are we talking about it?

Music or euphoria?

Euphoria. 

I used the music element to paint a picture of euphoria in your mind.

What is it about euphoria?

Why does it push me on alert?

Is it that I don’t wish to enjoy my life?

What could I have against euphoria?

I’ll tell you. 

Before I tell you, I’d like to mention that I love the feeling. 

It fantastic being in the feeling. I’ve got one eye on my alerts though. 

WHY?

We make our biggest mistakes when hit by Euphoria. 

Yes. 

Surprised?

Don’t be. 

Under the influence of Euphoria, our biochemistry is so, so different. 

We’re far from peak. 

Our defences are down. 

We are highly capable of plunging into…an abyss…oblivion…call it what you feel is befitting. 

We let go of safety. 

We bet big. 

We bet dangerous. 

We bet the farm.

That’s what euphoria can do to us. 

I do feel euphoric, at times. 

A trade’s gone well. 

A deal’s come through. 

Stability at home. 

Euphoria. 

However…

…as I told you…

…one eye is on my alerts. 

If even a single thought emerges of betting big, bigger than my normal size, well, my predefined red-alert also goes up with such a thought. 

I see my alert’s red flare, and the unwanted thought subsides. 

I am able to sick to within the confines of my position-size rule.

If even one thought emerges of trying a new untested line, just because all current lines are doing ok, well, my predefined strategy saturation alert also goes up with such a thought. 

I remind myself that I’ve decided upon financial strategy saturation, and don’t plan to add a new line, at least not in a hurry or upon an impulse. 

I’m able to stick to my strategy saturation decision. 

Are you understanding what I’m trying to tell you?

If yes, I’m so happy for you. 

You’re not leaving it for later. You’re understanding it without being hit by the aftermath of a decision taken under the influence of euphoria. 

Cheers mate!

🙂

Did you invite the f-word?

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The next trade… 
… yeah… 
… take it. 
What? 
Can’t? 
Why?  
Afraid of what might happen. 
That’s the whole thing. 
You see a setup – you trade the setup.
When you see a setup, there are no more what-ifs, supposings or anything. Then, it’s just you and the trade. Take the trade. 
No room for f-(ear). It’s the new f-word.  
How do you drive fear out of the equation? 
Risk a miniscule fraction of your networth per trade. 
Don’t make trading your bread and butter. Make it your bonus. 
Don’t allow anyone else’s negativity to creep in. Don’t talk to people. Trade on your own. No room for tips. 
Don’t listen to your broker. Tell him what to do.
Don’t trade under compulsion. 
Enjoy your trading. 
Once in the trade, lose the mini-bias that got you in. Now, just manage the trade. 
Stop hit? You’re out. 
Run? 
Raise stop. 
Running? 
Keep raising stop. 
Losing some of your notional profits? Market throws you out?
Good. That’s a proper exit. 
See, fear wasn’t allowed to the party. 
Look for next setup. 
Position-size your entry. 
Take the next trade. 
And so on and so forth. 
Not upto trading?
Ok. Don’t trade. Till you’re up to it.
 
Demons out of the way? 
 
Up to trading again? 
 
See the next setup?
 
Take it.

Dealing from a Position of Weakness 

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When you’re losing… 

… you downsize your position. 

Why? 

To save your corpus. 

You lower the risk. 

Is risk quantifiable? 

You bet. 

Risk is no abstract entity without a body. 

In a trade, your risk is defined by your stop to stack-size ratio and the size of your one position. 

When you’re losing, you either lower the magnitude of your stop, or lower the quantity of your one position. 

Till when?

Till your corpus crosses par and then some. 

At par, you trade normal. 

Normal stop. 

Normal quantity. 

What is normal? 

Depends on you. 

What is normal for you? 

That’s what goes. 

Why the caution when below par? 

Lots works against you at this time. 

Sheer math for example. Downsizing sets this right. 

Emotions. 

Whoever’s got a remedy for those is king already. 

You. 

Your body-chemistry is affected. You’re sluggish. More prone to error. Nobody’s got a remedy for you, except you. Wait for your body to heal before trying out that perfect cover-drive, or what have you. 

Winning or losing in the markets depends a lot upon psychology, chronology, systems, strategy, application and adaptation of style. 

I like to call this “getting one’s meta-game together”. 

Let’s go people. 

Let’s get our meta-games together. 

Then we can scale it up. 

🙂