I don’t usually advocate trading due to the higher probability of loss ascribed to the predominance of cognitive bias and behavioural economics. Note from personal experience that an awareness of such risk is insufficient to curtail the risks. For those that will continue to trade, here are my trading rules, most of which I have learned the hard way. Learn from my mistakes and take it to heart!
Trading Rules
- Never let a single position be more than 15% of the total portfolio exposure
- Never let a single investment narrative, sector or theme take on more than a third of the portfolio value
- If you feel stuck or uneasy on a position cut it in half
- Never let a trade thesis drift
- Don’t trade illiquid product
- Don’t take counterparty risk
- Never enter a position without thinking about your exit and the risks
- Never risk more than you can afford to lose
- Never trade lumber or any other manipulated market
- Plan your work and work your plan getting swept up in the market action incites emotional responses and sub optimal or bad decisions
- Portfolios levered more than 3x to capital base or subject to additional monitoring requirements, including diversification, risk VAR, and simulation, placed stop loss orders
- Before entering a trade, consider if a suitable investment could be made instead freeing the trade thesis from narrow time constraints
https://portfoliothinktank.com/are-you-a-trader-or-an-investor/
James’ professional orientation points at the zenith (and sometimes nadir) where technology and investments intersect. He is a Fintech entrepreneur and has served twenty years of a lifetime sentence.
James is a patented inventor, quant pioneer and investment manager. He is the founder of Gravity Investments, a unique investment and technology services firm centered on James’ inventions for diversification measurement, optimization, visualization, and analysis. In the development of the platform, James has pioneered A.I applications, diversification attribution, down-side diversification, portfolio re-optimization, full-lifecycle strategy optimization, programmable investment policy statements and core-satellite optimization techniques.
In working with advisors, funds and money managers as both a strategic sub-advisor and software consultant, James has consulted and trained hundreds of professional investors on portfolio design and optimization. James has a unique ability to look at any investment process and find practical, intelligent and often quantifiable opportunities to improve the investment product.
Inspired by the work of Nobel Laureate Harry Markowitz and the efficient frontier, James has championed and pioneered the science of diversification. James’ technology has advised
or assisted in over 30 Billion dollars of investor capital. His vision of a more perfect investment management system is at the heart of Gsphere ( www.gsphere.net )
His passion for performance, curiosity for the unknown, and drive to excel empower his service to investors.
James is Founder and CEO of Portfolio ThinkTank (the B2C company) www.portfoliothinktank.com, Founder & Chief of Financial Engineering at Gravity Investments www.gravityinvestments.com (the B2B company) and Chief Investment Officer at Gravity Capital Partners, a wholly owned SEC Registered Investment Advisor.