investments · trading · Uncategorized

An Experiment with Trading

I have been a long time trader in personal capacity and in recent times also in professional capacity.

What I trade in personal and professional capacity are very very far removed from each other.  I have traded Equity options, vol strategies, repo trades, leveraged strategies on equities, fx and also credit derivatives. My trading style and attitude to risk is vastly different when it comes to personal and professional activities.

I do seem to generate more returns on a personal capacity before i have massive draw downs and then back to decent returns. I have started writing down official rules for my personal risk.

The biggest reason I believe why personal trading is so volatile especially for young people “investing” or “trading” is the belief in the primacy of IDEA. We tend to look at an Idea that we have researched or figured out and become a servant to the idea. We know haphazardly what stop-loss is but we don’t really implement it strictly. When the idea doesn’t work out too well, instead of looking at the basic assumption that the  idea itself may be wrong we tend to buy in more into the idea, look at news and blog posts that can confirm our theory rather than the ones that prove them wrong.

While at work, I am not a slave to any of the ideas, there is a detachment to the work. I look at myself as a risk manager and if I put that element on top, then most times I am looking at risk like balance sheet and regulations that typically don’t affect the personal portfolio, but am also very confident in the assumption that there will be a few thousands of ideas that will come by my way, and I don’t need to pick all of them and win in all of them. I need just the following

  1. Have enough capacity (in terms of limits) to put on as many of the new ideas that come to me as possible
  2. Have the rules of conduct in my brain about when I can downsize an idea when an even better one comes along
  3. Know that my edge needs to be just greater than 60%. I don’t need a sure win each time.


I have begun implementing these learning into my personal portfolio as well. My Sharpe ratio has increased dramatically but the experiment is only on a very small portion of my assets and I am still fine tuning my rules.


What has helped is the following

I write down in words and in numbers what the idea is.

What are the resources this idea is going to consume like margin limits etc

What is the expected time frame

When will I start cutting or stopping the position

What are the possible risks associated with this trade, what could go wrong

Every day review this and other ideas that may come along.

Also when a trade does go your way it’s always best to keep cutting the size at good levels and it is also always best to keep writing down these levels


All this writing down should happen before you put on a trade. And all your limits you should know before you put on the trade.

Are you okay losing all your capital? then and only then is a leveraged strategy okay. etc.


I will write down more of my ideas in detail in later posts.





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