When things go wrong or the markets become quiet, we must put in more effort

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While Gold seems to be holding steady for now, the lustre has faded from BTC.

As we step into May, I must admit I've been rather quiet this year on the trading front, particularly concerning Crypto and equities.

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I missed the beginning of the rallies in these markets, and my lack of trust in their upside potential made me hesitant to chase them higher, fearing I might buy just before the trend reversed.

 

This isn't the first time I've missed a significant move, and I'm sure it won't be the last. However, as I'm solely responsible for managing my own portfolio, having a couple of stress-free months isn't a bad thing at my age.

That being said, in the grand scheme of things, my longer-term bets and hedges against further economic downturns have proven to be a blessing, especially my physical gold holdings.

 

Furthermore, while many continue to focus on crypto and equity markets, I've had some successful ventures in the commodity markets that I've been highlighting since the beginning of the year: Copper, Aluminium, Corn, and Wheat. These more than offset the losses I will incur on my July Cocoa put options, which expire in four weeks. Additionally, I've taken a long dollar position, which I intend to maintain for another month or possibly longer.

 

While I acknowledge that many commentators and traders prefer to specialize in one or two investment products or sectors, my experience as a futures broker compelled me to follow most market sectors. Thus, transitioning from one sector to another is not a problem for me today; in fact, it often proves to be advantageous. Nothing is worse than trying to make money in a market that remains stagnant for six months!

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There have been times in my career when I spent days on end solely focused on one market. However, when these markets quieted down, I found myself doing crosswords and getting distracted from my job, which was to help generate profits in speculative markets. While doing crosswords might be acceptable when trading with one's own money, it's unacceptable when managing the funds of investors who rightfully expect their capital to be actively managed.

I see too many fund managers today sitting idle, observing inactive markets, instead of diversifying into new markets where opportunities are more abundant. Some fund managers believe their expertise in a particular market is more crucial to their investors than generating returns on their capital, but this belief is unfounded.

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Personally, when evaluating a fund or trading program, I prefer those that diversify heavily across all sectors or actively pursue short-term profits while maintaining a high level of risk management. I.e., a fund where the manager consistently extracts small profits from the market every day or every week, rather than waiting for the next significant trend to emerge and going all-in.

As I approach my twilight years, my risk appetite is diminishing, and much of my time is spent strategizing the best ways to hedge my amassed wealth. I achieve this by assuming a calculated amount of risk across various markets. In my current position, I can afford to have stress-free weeks or months because it's my own money at stake.

 

However, when I managed other people's capital, it was incumbent upon me to adjust my trading strategies to market conditions. This meant working harder when my chosen sector was quiet or alternatively seeking out markets with higher volatility and opportunity.

 

Unfortunately, I see too little of this approach today.

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Perhaps attitudes have shifted in the world of influencers and superstar traders. It may be more important to many new managers to be right more often than wrong, and I understand the logic behind that view. However, what truly matters is not the ratio of winning trades to losing trades, but the size of the profits relative to the size of the losses and how much the portfolio's value increases over a given period.

I won't dictate how anyone should run their business or manage their trading programs; everyone must be comfortable with their approach. However, managers should not lose sight of the fact that this is a risk business, and investors understand this. Your job is to leverage your knowledge and take calculated risks, employing prudent risk management practices, to enhance the capital entrusted to you. It's not about trading once a month in a stagnant market and expecting clients to be satisfied with a 3% return at the end of the year. That's not what it's all about, and frankly, it's never been acceptable or profitable.

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