Solving Your Financial Puzzle

Within Your Own Limitations

As usual with these “Thoughts from Enjoy the Ride” articles, I get inspired by questions from traders out there asking me real questions that have difficult answers. One such conversation with a new trader from India prompted this piece, but there’s something in here for traders of every size and experience level.

This particular fellow had started out with a very modestly sized portfolio, wanted to diversify his portfolio and was able to come up with 11 futures markets that he could trade in India. He loves the concept of trend following and had developed three different, varied strategies over different time periods and logic. He designed everything he does to fit his personal time capabilities. He used 1% of equity to size his positions. His concern was that he hadn’t done enough to get great diversification and his risk levels were a bit high, so drawdowns were going to be larger than he would like.

Every trader faces his/her own limitations in trying to solve the financial puzzle facing them. There is zero shame in facing up to that reality. Nobody in this game has infinite wealth, perfect knowledge, unlimited skills, or inhuman mental control over themselves. In short, this trader did everything correct, in my humble opinion, but he knew he was not where he wanted to be.

Our Indian trader could not trade other markets available in places like the US due to government/broker restrictions. He had a smaller than ideal portfolio size. He had computer skills and used them. He had a plan and was executing it. He wanted to know if there was anything I might suggest doing to improve his situation.

The answer from me? He’s trading with a tight fence around him in terms of what his options are. Adding more money to the portfolio would help, if he can figure out a way to do that. Figuring out a way around government/broker limitations might expand his diversification. I have a friend in Europe that didn’t like the restrictions on his trading instrument possibilities, so he created a trust in the US, signed up with a US based broker and expanded his ability to have more alternatives to trade. Having a larger portfolio might allow our trader to trade lower risk sizes, within his preferred risk tolerance zone. Continuing his computer work might help him add more strategies, but he’s sort of at his limit right now.

Bottom line for him and every other trader out there, including me, is that you have your own personal financial puzzle to solve and you have limitations to what you are able to do to solve it. Figure out those limitations, do what you can to move the boundaries outward, giving yourself more possible solutions, then design what you are doing to exist inside those limitations AND enjoy the ride!