Downside

Optimism is terrific but a mind full of nothing but cheerleading can seriously damage our wealth.

Today I started a new way of trading that will keep me in trades for a longer time. The idea is that the shorter the time frame, the more noise in markets and therefore the less clear the signals. Short term chaos, long term clarity is not a bad watch-phrase.

My absolute profits, profit per trade, profitable trades and (therefore) expectancy will all go up. That’s the optimistic side. The reality is that losses will be nominally larger too, although I am pretty sure there will be many fewer of them.

That’s worth repeating. The dollar amount of losing trades will be larger than I’m used to.

As I have just discovered, sticking with a wider stop-loss point can be painful. To date my exit points have required only a relatively small dollar loss, and the time to either find profit or loss is less. The pain of sitting with a losing position – or positions – is almost greater than that of actually losing money. That’s crazy, of course, because there is no physical pain involved.

Such is trading though. Pain of being wrong, or the possibility of the account shrinking is worse than actual physical pain or real loss. The key is to trust the system and build a base of experience so that when I’m feeling weak, I can stick with it. Spreadsheets are my friend.

Style

Finding my individual style of work took on a new urgency this week.

In the job just past, all I needed to do was to turn up. The paycheck arrived without much creativity or thinking on my behalf, although it wasn’t as though there was no pressure or need for action. The choices at that place were relatively few for most circumstances, which made life simpler than if I had to create choices and then decide upon them.

Another way to look at it is that in, say, a simple strategy computer game, one makes decisions, but there can only be a limited number, and thay have been thought out prior by the developers. The feel is one of choosing one’s destiny but the reality is that it is only a slice of all possible outcomes. Plus it’s a computer game.

Being in the business of making one’s own income means we do all of that. We create the game, we define the rules and, given enough time and experience, we can limit the choices down to the best ones if only to save the angst of choosing. Decision-making can be very stressful, a problem we can mitigate by reducing the number of decisions to be made each day, or reducing the number of choices on each occasion or both.

Now to find my own work style. I can be creative in spurts, but my preferred way of operating is more mundane: If this, then this, with the alternative of this. I’m relatively lazy and enjoy checklists and following rules, so this simple way suits me day-to-day. Neat and tidy makes me happy.

This won’t suit everyone, and so we each need to find what works strategically and tactically. My strategy involves short bursts of insight and creativity with the view to financial independence, whereas my tactics are to make implementing that strategy as simple as possible, with as few stressors as possible.

It can be done, but feels frustrating when you’re between both ends of that barbell. Onward ho, though, for there is no other choice.

Insecurity

There will be a lot more of this to come. Excerpts from here.

In July 2005, the last time we saw unemployment this low, the savings rate was 1.9 percent of personal disposable income. Today the savings rate is 5.4 percent. Nobody is spending because today’s job quality is so low.

Counter-intuitive, no? Savings earn zero – or cost us to maintain – and yet Americans are saving at decade-high levels.

Nowhere in the job numbers assembled by the Census Bureau and the rest of Washington’s finest minds is there a category for those taking a job for less money and fewer benefits.

No. The participation rate remains at a 40 year low. 94,000,000 people of working age no longer do so.

Consumers are scared of what will happen when the Fed begins raising rates in earnest. When it tightened the first ¼ point, interest rates jumped 1 percent to 2 percent on many credit-card accounts — the last bastion of liquidity for the middle class.

Horror story. If that last statement is true, we need to make sure we’re not in that particular category. The savings rate tells us that we are doing what we can to avoid those cards and their awful rates.

Save. Find and create income. Spend less. Invest. They are the goals.

Saturday

Delicious. Saturdays are delicious once again because of a preceding night’s sleep. Somewhere, somehow, the neural pathway to happiness created a kind of shrine around the delight of Friday afternoons and nights and Saturdays. This feeling is sufficiently powerful to drive me to recreate the feel of Saturdays from, let’s see now, at least twenty years ago.

So just why do early weekends mean so much? My gut tells me that it’s the lightening of the load of responsibility that came with them. From pretty early on – primary school at least – I carried life relatively seriously. Homework, mostly, but my minor life commitments did not always create energy. Some friends added and some friend subtracted from that reservoir, which sounds odd now that I write it. It is true, however.

Even the things I enjoyed at the time and remember fondly didn’t always wear lightly. Sport commitments are among my favourite nostalgia trips; footy and rowing for sure, tennis less so. Learning the piano was mostly a mistake, even as it gave me some appreciation for classical music. The hours spent poring over scales and Hanon, Beethoven and Mozart drained much from that time. It simply wasn’t my thing.

And yet I did all of it. The reason is simple enough; I was obedient. If the ‘rents said for me to do something, it was done, unquestioningly for the most part until – piano most notably – it all became too much. Then I said “no”.

Which is at the heart of much in life. Saying no, understanding strengths, chanelling energy and continual self-assessment are among a handful of skills we need to get to a 75% life. The others mostly revolve around how we interact with people, a whole other question.

Anyway. Happy birthday to me. 54 today and still learning.