Daily Speculations

The Web Site of Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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8/30/04:
Life and Markets by James Sogi

One of the best pieces of advice I got on trading was to put the trade into perspective of the big picture. Often the emotional response is not commensurate with the trade risk or loss. Whether trading .1x or 10x leverage when it comes down to it, its only money and normally only a small percentage of it is at risk. The priorities need to be ordered. Much of the emotional response derives from other sources. As Lack aptly put it, insanity is doing the same wrong thing over and over. When you place a trade you are not betting the farm, you will not lose your house, you will not lose your children, you will not lose your life. You hopefully have some sort of money management system. Mr. Williams wisely suggested having alternate income streams. Vic quotes Henry Clews who suggests income producing real estate when the market is slow. Diversifying is good. In my time I have seen people lose their farms, entire business, their homes, and their children and even their lives on the fall of the gavel. Some of the deals here are starting to edge over 1 billion as the real estate market skyrockets, and hinge on a yes or no decision, not much more than a flip of the coin. That's risk. Its one thing to crush someone in a game of poker, a game of chess, or win a trade, but when you crush someone's life, even victory is not always so sweet. Got to put the trade into perspective. Greed and hubris encourage excessive risk,. Large draw downs result. Regular steady growth, reasonable balanced risk, modest draw downs, and steady but reasonable income is a worthy perspective on market operations.