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Friday, 16 September 2011

Are you a speculator?

Although I hate “labeling”, I am cognizant that to “fit in”, I have to “label” myself in a language that others understand.

In investing circles (blogs/forums), I will call myself a growth and income investor. In trading circles (war-rooms/arcades), I will call myself a swing trader.

It’s like how ants or hyenas smell their own kind. If I don’t smell “right”, I will be excluded. So just like the Arabian caravan trader of the old silk route, I antenna ant here, laugh hyena there; I am citizen of the world!

But in my hearts of hearts, I know what I am. I am a speculator.

It’s both to pay homage to Jessie Livermore and a better reflection of how I trade/invest.

Let’s take an example.

If I buy an Ipad today, and flip it to someone at a slightly higher price the next day/weeks/months, I am a trader?

But if I store this Ipad for 30 years and sell it as an antique or collector’s item, I am an investor?

Is there a difference? Only the time horizon?

I like the distribution bell curve. A small minority will make money big time, the big majority just break-even, and another small minority will lose money big time.

I don’t have scientific proof, but I personally think the distribution bell curve applies to both investors and traders! Just look around us ;)

Calling active trading a fool’s game and calling oneself an investor does not make the odds of financial gains better – at least for my case.

I don’t want to rub it in, so I won’t ask for your XIRR if you call yourself an investor. Cannot beat inflation rate of 5% (mid-point), you know where you fit in the bell curve…

I prefer to use money earned and hours invested:

a) I made $10,000 in a year and I spent 52 hours (I hour a week)

b) I made $10,000 in a year and I spend 2,920 hours (8 hours a day)

Which do you prefer?

I’ve realized that the more hours I spent, the more money I lose! After lots of reflection and “expensive” school fees (I went to the best school – it’s called the market), I’ve found my optimum mix. My speculation time horizon is between 6 to 18 months. Whether it’s a trade or investment I’ve no clue!

What counts – as with all endeavors – is the grey matter between our ears, and the pump in our chest! Got brains no baxxs, dare not pull the trigger. Got baxxs no brain, die male chicken standing. (I really pray no readers are below 18! Female readers, I really can’t find a good metaphor for heart… Sompa!)

Why homage to Jessie Livermore? It’s because he has won and lost big time. Each time Jessie went bust, he can pick himself up! I have to believe if he can do it, so can I.

However, the more poignant reminder to me - in the end, Jessie Livermore blew his brains out… If Jessie can, so can I…

I too have blown my account out before. Although I have picked myself up and recovered and thrived again, I am aware the seeds of self-destruction still lie within me. They are merely suppressed; not removed.

That’s why I am focusing so much on the “mind”. It’s the “mind” that wags the tail of money management and method. Or is it the other way round?

It’s Friday! Enough philosophical “koyok” from me.

Have a super weekend everyone!


  

8 comments:

  1. once you are a loser, you will always a loser.

    fortunately, losing is part of the game in trading, no big deal.

    so when people ask you are you a loser, tell them that you are. the bigger the better. cos you can afford to lose and are not afraid to lose.

    trading is to learn to lose, not to win. cos we know how to win but don't know how to lose.

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  2. Yes Coconut,

    Like the first thing they teach in learning judo is how to fall without hurting yourself!

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  3. Hi Jared

    I realise that trading / investing exposes one to risk. And that is something Mr. Market constantly teaches me which is that I cannot consistently outwit it by "predicting" if prices will go up or down.

    But having had exposure to the market since 2003, I realised that I am less afraid to try new things and am more risk taking in real life.

    That is one benefit from some degree of speculation, I push myself to make a decision and accept the consequences. If I had not encountered the market, I would probably have lived a very safe but deadly boring life that couldn't be said to be well-lived :-)

    Be well and prosper.

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  4. and smol, when we say trading, we can go both long or short. investing we only go long.

    as for time frame, my trading position can last for years if i follow the trend correctly (i always make mistake on that). so no different between trading and investing for me.

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  5. Hi smol,

    I kind of think livermore did the ultimate trade of his life - he realised his life is not going as well as he would hve wanted and so he cut loss on his life. I believe that if his life is worth living, he won't take his life. That's my interpretation anyway :)

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  6. 1) Hello Panzer,

    A bit of palpitations of the heart remind us we are still alive and rocking!


    2) Coconut,

    We fly with 2 wings - to "borrow" your analogy :)


    3) Ah LP!

    Yes, there's so much to life worth living for. So many places to explore, so many experiences yet to be felt!

    I am so glad to have made new cyber friends since I took the jump into blogging last Christmas.

    How cool is that!?

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  7. not to speculate on other peoples life, but if you live a wild roller coaster life, its easy to take your life when you hit rock bottom. many famous stars did just that.

    they end up like that not becos they hit bottom but becos they once was up there very "high".

    the top speculator (in my opinion) had over shot himself. that is also why i keep depress myself "low" even when i make big bucks.

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  8. Your words of wisdom is worth it's weight in gold coconut!

    Just like Icarus (Greek mythology) who flew too close to the sun, I too have the seeds of hubris within me.

    We both have our own ways to "plant" our feet on the ground. You "depress" yourself; I laugh at myself ;)

    ReplyDelete

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