Late last year, I asked a reasonably established trader friend if he would take 60% return per annum on equity with low risk strategies (aka close to no equity loss for the year). He was reluctant as he spiraled towards 5 to 10% return on any single trade, perhaps even 20% on a good day. His risk factor would be 3 times higher than mine, and might crisscross the market average. His efforts would probably be 10 times less strenuous than my strategies.
I however, will never be like him, and not because I have not tried. But we were born and forged in different temperaments, and have different agendas. I did not intend trading to be an eternal career. He would trade to his last day. I wanted to pass on a system of learning and flexibility that my children can use at their discretion. He wanted to hone every instinct in his body to naturally respond to trading opportunities. I on the other hand, minimized internalization and opted for intellectual drivers that may be automated in a system. He can trade different strategies, anytime of the day. I trade any instrument any time of the day but stick to a system of largely independent wheels and nooks. Both of us wisely use leverage to our advantage and are never exposed beyond our comfort zones.
My varied systems share three overriding criteria –
1) Complete independence with no reliance on any source of information and influence, and can be deployed according to changes in the markets.
2) Employ hard work to reduce risks. Hard work can be automated, risks cannot.
3) Never lose sleep using low risk strategies and money management. This also means it targets equity enhancement and is not regular income driven.
Can anyone combine our different personalities? Yes, but from a value : risk efficiency angle – such marriage will dilute the merits of each system.
Hence it is important we develop and fit a trading system according to our natural inclinations and goals. If they do not align, change something. And do not lose sight of the results you are contented with.