Differentiating Yourself From The Herd

One of the best pieces of trading advice I ever received was during my first years while I was attending a seminar in Santa Clara, California.  In one of these seminars one of the instructors said something I will never forget (and I'm paraphrasing):

If while you trade you feel 'off' in any way you're doing something wrong.

Today I see A LOT of people in this market succumbing to what can only be described as 'The way everyone else is feeling', and unfortunately most never realize, or even attempt to realize, that to become the best trader you can be requires you to consistently think, but act in the opposite direction of the herd.

Think about it for a second.  If everyone feels 'tired' about this relentless rally, doesn't it make sense from a contrarian standpoint to push your long trades as much as you can?

Yes, eventually you will be wrong and that approach will fail, but you have to strive every day to battle everything inside you that makes you feel like everyone else, and override those emotions and act in the exact opposite direction.  It's not something that comes easily to any of us, but after all this business is about the 5% club (i.e. only the very few make money consistently).

It requires a lot discipline, and especially a lot of focus and energy to condition yourself to do what is hard.

If you're feeling off in any way, you're doing something wrong.

Focus Daniel-Sun

There are many things that differentiate the winners from the losers in this business we call trading; however, one's ability to consistently focus on their goal is likely at the top of the list.  This is no by any means some re-hashed self development or new-age statement, but rather a philosophy I truly believe in based on my personal experience.

(My) history has shown that the periods whereby I have exhibited the most focus have also typically been the periods whereby I have been the happiest in all senses (physical, financial, spiritual, relational, etc).  Focus brings a certain amount of energy to the work you do.  When you get completely and utterly focused on your goal(s) there is no sense of time.  For all intents and purposes you "lose yourself" in your vocation.

So my question to you on this Sunday morning is:

• "What you are doing to ensure you're moving towards your goal?"  
• "How do you spend your Sunday evenings preparing for the upcoming trading week?"  
• "What are you going to do to separate yourself from the herd?"

These are good questions I consistently ask myself so make no mistake - this post is not just about preaching to you.  It's a reminder to myself that success in this business requires a consistent effort.

Friday Deep Thoughts

I haven't updated the blog in a tremendously long time and I've been thinking long and hard about what to do with the blog going forward.  I've toyed with the idea of expanding it into other projects but to be honest my life outside this blog has become increasingly busy and hectic.  At the risk of getting too personal, my wife and I are planning having kids so my attention outside this is going to be very limited.

My belief in the K.I.S.S. principle is very profound so the idea going forward is to make this site completely market-related.

When I look back at some some of the posts over the past few years it seems quite obvious to me that my greatest joy was sharing ideas with other traders/investors.   In fact, there seemed to be a very nice community of people who regularly visited so I want to go back to those 'grass root' times.

That said, I do plan on continuing with the Developmental Series section of the site.  That was one area I started very briefly but think there is a lot of potential there.

Stay tuned!

2012 - Year In Review

It's been a long time since I updated the blog so I thought I would post a 'year in review' write up.  I'm not sure how many people read the blog nowadays, but I'm really posting for myself as I find it therapeutic. 

In general 2012 was an "OK" year.  I started the 1st half on very good footing.  I experienced a lot of success both professionally and personally, got into the best physical shape of my life, took my marriage to the next level, and created new and exciting relationships.  Everything was going extremely well.

On the other hand, July through December were very tough months - especially personally.  Certain "life issues" came up and when you trade with those issues it clearly impedes your ability to focus on the things you need to be focused on, so needless to say it was challenging.  But, this post is not about whining about how things went wrong - it's aimed more at setting an intention to learn from those tough situations and subsequently applying those lessons learned going forward.

CLIENTS' EXPECTATIONS

One of the biggest lessons I learned last year was with respect to clients' expectations.

It seems like an 'obvious' statement when you hear that "At some point every strategy will have its losing period."  But, it's one thing to conceptually say that, and quite another to actually live through the losses and continue trading the strategy.  That's where the rubber meets the road.  It's not an easy thing to do, but absolutely nothing in the trading world is 'easy'.  It is a constant challenge that makes you grow each day, month and year.  

I have always been very straight forward with existing and potential clients that the Freedom system is:

• A long term system (i.e. one must look to compound their capital over years);   
• That you must accept/understand the risk(s) involved;
• Do not micromanage the monthly profits/losses; and
• Allocate the proper amount of capital to the strategy that you feel comfortable with.

All this - in principle - is much easier said then done.

2012 RESULTS

The cold hard truth is that the Freedom system had its first losing year in 8 years in 2012.  Below are the annual returns:

Some may not find it surprising to hear that 2012 was also the first year I lost clients, and I have to admit that I was honestly taken back by how 'quickly' - in the context of a long term system - some clients decided the system was not for them.  In short, the experience taught me a lot.

It re-emphasized the importance of trading a strategy (with the proper amount of capital) that you are comfortable with, and having the discipline to stick with the strategy - even through losing periods.

GRATITUDE

Now, I am by no means upset at those clients, nor do I hold a grudge of any sort.  In fact, quite the opposite.  I am very grateful for having gone through that experience.  It gives my clients - both future and present - a more realistic view of what to expect.  For 7 years I could show nothing but positive returns, but not any more and I'm OK with that.  I'm at peace with that.

The reality is that very, very few people have the ability to stick with a strategy.  Whether it's an intraday or long term position trading system - it doesn't matter.  They all require a certain amount of discipline and conviction.

'FREEDOM' FORWARD LOOKING EXPECTATIONS 


Pull backs in trading systems are natural.  Let me repeat that again.  Pull backs in trading systems are natural.  The 'Freedom' system, however, goes a step further when one looks at the 6-month rolling return.

As you can see there tends to be a natural and cyclical 'ebb and flow' in the system results.  The ebbs (and flows) differ in magnitude and duration, but the point is they repeat over time.  Also, notice that for nearly a decade we have periodically seen the 6-month return move below the 0% mark.

Translation:  there are 6-month periods when your total return is 0%.  Yes, that means flat.  

Again, this must be taken in the context of a long term system.  If one wants to realize the higher returns this is a reality of this system, and likely many others like it.

If you have ever considered allocating a portion of your capital to a long term futures position trading system NOW is the absolute best time to get involved.  If you are interested, or just curious about the system, please send me an e-mail at a.grant@ambgtrading.com.

I would be more than happy to answer your questions.

You Are Part Of The Herd

I have a philosophy about life that everyone I meet has something to teach me. From the panhandler to the successful entrepreneur it doesn't matter - I know they all possess a drop of wisdom I can take forward and apply in my life. The panhandler may teach me to be more generous. The successful entrepreneur may teach me about the importance of investing in oneself.

However, sometimes people teach me what NOT to do.

This afternoon someone I follow on my Twitter feed (@Xiphos_Trading) posted the following:

"Obama's $300B in jobs is an election stunt. He's had 3.5 years to create jobs and has proved he doesn't have a clue how to."

While I could focus on the political aspect of his comment that is not where my focus was when I replied saying:

"You're a maniac if you believe any single president could."

My point is that this type of thinking is typical of the masses (i.e. the herd). That is, those who give politicians far more power than they actually deserve. Do you honestly believe a single politician has the power to create millions of jobs for an entire nation?

Continue to bitch and whine and you will succumb to the reality that you ARE the herd. You belong to that group of people who are followers and not leaders.

Your responsibility in this world is to create a future for yourself and your loved ones. Many democratic countries were born (in part) out of this premise - that from nothing one can create everything.

Dismiss the politics that are going on these days. Your life does not depend on the outcomes of an election, nor whether Obama can create jobs. If you don't have a job then go out and find one! "There aren't any out there", you say? You aren't looking hard enough. This world is more abundant that we will ever know. There is an infinite amount of resources, jobs, money, etc. It's our task to tap into that abundance. This requires that you separate yourself from the herd (and herd thinking, complaining, etc).

Guys like Rick (@Xiphos_Trading) are part of the herd. Yes, Rick. You are part of the herd.