Portfolio Considerations of a Trading Strategy (Part 8)

Over the last few posts, I’ve been making the point that portfolio considerations, or “money management,” is an integral component of trading system development. Without these details, a viable business plan cannot properly exist. I’ve suggested these details to be frequently overlooked because discussion of one’s personal wealth is very limited in Western culture.

Discussion of wealth is not suitable for strangers, friends, or even the closest of family (if that) in many cases. This leaves only one’s financial advisor or personal attorney as potential confidants.

Whenever discussion is taken out of the public domain and packed into isolation between a select few (or less), the medium suddenly becomes ripe for coercion and chicanery to proliferate.

Understanding this is why I encourage traders or anyone associated with Finance to watch the CNBC television series American Greed. Innocent people are repeatedly usurped by sketchy characters posing as investment advisors or lawyers who offer a cut of “special opportunities.” So often, the directive becomes something like:

“…but don’t tell anyone else. I’m making this special deal
available to only a select few. Give me your money and I’ll
invest it. You will receive monthly statements and be able to
track its growth. Just keep this between us.”

Because I hope to make loads of money, I heed your demands. If you can swear me to secrecy then you don’t have to worry about the authorities knocking down your door. You are free to steal my money and to find more victims.

Catastrophic loss in the stock market has a similar feel. The discussion is just between me and the market through my stock broker or brokerage. Things might be going fine for months to years as I receive monthly statements showing a steadily increasing account value. Suddenly a bear market hits and I’m stripped of much wealth.

I don’t even know what hit me. I am decimated.

Without meaning to be insensitive, I would argue the feeling to be comparable whether raped by the financial markets or by the neighborhood con-artist.