I read an interesting interview in Wall St. Cheat Sheet in Smita Sadana.
Decided it will be useful to read many, the interview is long and translated for everyone through an automatic translator, so everyone can read it in Russian.
Original : wallstcheatsheet.com/?p=1151
To the cinema, Squatting Tiger, Hidden Dragon, actress Michelle Yeoh plays the main warrior of the ancient martial arts. At the end of the film, she confronts her protégé and instructs her with the ultimate secret to success.: stay true to yourself. Smith Sedan's professional trader offers us the same sage wisdom for investing and trading.
Smita delivered, 43 % accounted for the annual benefit over the past 11 years. During the same period, the index S&P500 virtually unchanged. Her accomplishments make her one of the greatest individual traders - and arguably the best female trader - on Wall Street.. My interview with Smita was like experiencing the passage from Jack Schwauger's classic book market trading Wizards. Smita enlightened me in dealing with emotions, risk management, and the art of discipline.
Infected – another Wall Street professional, praised for both her skills and her character. IN 2004, she lost her father to a tragic murder over a small sum of money. As a testament to her wonderful nature, she used this case, to reevaluate her life and devote new energies to helping others through financial education. Her enduring TraderVantage perpetuates her mission.
I'm sorry, what i couldn't say, that successful women on Wall Street are equal in number to successful men. but, if Smita has anything to do with this issue, there will be an unprecedented number of women following in her steps soon enough.
Damian Offman: Infected, when you fell in love with the markets and decided to dive into?
Infected: My interest in the markets began as a hobby in 1995. I just finished my dual owners in economics. Stock market was the new American passion. I don't forget to think, “How hard can, buying low and selling high to be? I have education. I can do it really well. ” Good, First year, I managed to finish approximately 20 % down - which is bad [laughs], but worse compared to fact S&P500, risen 30 % that year!
My active attachment is netted I'm a very bad hit. But I wanted to do it right or not at all. So, I started reading and researching. I faced it, what, it turned out, was one of my favorite rates by Paul Tudor Jones, “Why not make your life the pursuit of happiness, and it doesn't hurt?“I thought about it quite a bit and said, “I'm going to give me one year. If I can flip this, i am going to do it. Otherwise, I'm going to leave. ” I would leave, had, I have not started to make progress. But early success then was the beginning of my application to the market..
Damian: You can share some of those early successes, when the light went on, and you knew, that you could be a profitable trader?
Infected: It was the mid 90s. Everything was on the rise. Financial media was just getting started. There were many, in order to study. I was just fascinated with the way displaced markets. I was fascinated by them.
The way there, where am i today, was absolutely incredible. We've been through two of the historically worst bear markets in a single decade. As a result, I learned an incredible amount about the market in a very short amount of time.. Under normal market conditions, that amount of learning would probably take several decades.. But market action from the mid 90s to 2009 was unprecedented.
Actually, I am very lucky and grateful, because in the mid-90s the markets were quite forgiving of trading mistakes - since most speculative markets, playingfor promotion. but, if for example I had to start trading today, I would like to be much a more knowledgeable and empowered trade education.
Damian: So you would say, what is more difficult to earn a living as a merchant today?
Infected: Absolutely, Damian. Markets have changed. It's like a Gladiator movie, where gladiators should be prepared to know, what comes. We are no longer in time, when things only rise in a straight line, and it doesn't matter, what do you exchange. Actually, stacking in one thing, maybe, was ok then, but it's definitely not good now, because the markets change by a dime. That, what once happened during the year, can now happen in days.
I remember in December 2008, that we had 4% steps in variability per day! This – something, what didn't happen in 70 plus years. Markets have become and will remain difficult to navigate. We're bombarded with a sustained assault of information, markets are much more volatile, and emotions became more chaotic. Money management and trading business is tough to start. But when you add these boosted variables, it makes our profession a real problem. Certainly, overcoming challenges, useful. but, new environment means, that we should be better prepared.
Damian Offman: How have you succeeded so far?
Infected: Good, in the end 2008, I was lucky to achieve a compounded annual return 43 % during the past 11 years. Considering, that I do not take undue risk, let us just say, what I think, that i'm allergic to big recession [laughter]. So these returns – decent risk-adjusted return. I don't rely on leverage. Given the state of the markets in this time period, I feel very grateful - blessed. This – another reason, I feel compelled to pass that, what i learned from the markets.
I'm always looking for things, to improve. The marketplace actually teaches you many life lessons. Companies, who do well, are those that change with the times. Merchants, who do well, are those, who wishes to be flexible on the way, which they follow towards their goals. People, who are happy, are those, who is not fighting the inevitable change - instead, they hug and adjust to him [laughter].
Damian: Can you give me some examples, how your prospects have evolved since the crash in 2008?
Infected: In September 2008 I understand, that this was not a normal bear market. I was trading through another bear market at the beginning of the decade, so knew, that I will depend on my number one sales manager: capital preservation. I got busier thesis, "Protection – the best offense.” I entered a bear market with my account at all-time highs, and I – generally a risk-averse person, who does not want to take risks - especially in 2008, i wanted to hold on to my profits.
I once took a big slump in my account - sometimes 20 % or 30 %. but, i would keep making new highs, because we were in the markets of speculators, bulls. For a long time, I understand, that I can't do it anymore - even more so, that my account is growing. Recession may have too much effect on my soul. So, as i said earlier, You must adapt and change to new circumstances.. I never intended to make this change, but I had to tame my trade a few. I now use smaller positions. I left some assets in cash. I no longer trade my entire portfolio, which i always did. Mostly, I learned to win, playing good defense.
Damian: Although I – risk taker, I would also say, that my legal education made me take a few risks unwilling. When I first started trading, this was a key hurdle for me. How do you balance your risk aversion, to still succeed as a merchant?
Infected: very good question. I like to think of this topic as driving. What is the main purpose of driving? The main goal is, to reach your destination. If you drive in good weather, and the road is clear, You can drive in the speed limit - which, inter alia, I lead this path in reality also, because i – risk, unwilling [laughter]. But if there is rain and snow, rain, and the fog is in front of you, You must drive safely and safely to reach your destination..
To some extent, shopping has changed forever. On the other hand, money management rules will never change. I think, what is this – then, where most people spoil. The problem is usually not in the analysis or whether you are a technical or fundamental trader.. The problem begins, when traders do not articulate or follow money management rules. For example, they, maybe, don't honor their stop losses, position dimensions, or diversity. They are, maybe, don't care about recession. They may continue to double down on the trade., because they believe, something something – big investment and fall in love with their own thesis. Proper trade – very difficult balance, to hit, because you have to be busy with a stock or company enough, to have a position, but you should also look at your own shoulder, to protect yourself. Since I often say, trading for a living dream come true, but with independence comes great responsibility.
Chairman Mao Xian famously said, “Good trade – 10%-th methodology and 90% psychology. " Hence, I think, what trade – pendulum between ecstasy and anguish. You want to use emotions as the driving force behind the act of trading, not behind the decision to trade. Emotions – essential ingredient for success. Have you ever met a successful person, who was not in love with her job?
Damian: Number.
Infected: I guess, what strong emotions – an essential ingredient for success - people, who are the successful use of their emotion, to stay in love. The problem begins, when emotions, instead of, to be the driving force behind the act of commerce, become the driving force behind every trade. You must stay in love with the trade, not every single trade!
For example, one of the things, who really changed my trade, was that, when i started to pay more attention to my complete portfolio, rather than taking possession of every wearable stock. I keep meticulous records of my daily trading. I write, where is my score against S&P500. So, if you asked me, where was my account at the end 2007, i could tell you exactly. One way to know, where are you going, is, to see, Where are you – check, goes, not, where each wearable stock goes. Everything, what do you have on an individual level, must be built into your account summary. I think, that traders make a mistake from saying, “This XYZ stock has lost me a lot of money. I have to make all this money back from the loss of this stock.” Once you begin to view your trading as a collection of many different individual industries, Your trading will reflect less emotional activity and more improvement. You will focus more on growing your account with less care, what stock or set of stocks get you there. This has contributed to a more balanced approach to the markets., since the count as a whole is devoid of wild hesitation, which incites wild emotions.
Michelle Yeoh
Damian: Given these changing times, Do you have any additional advice for merchants, to help control our emotions?
Infected: Use the checklist before, how will you make a trading decision. My checklist has a few ground rules:
1. Trade, small in times of extreme volatility.
2. Recognize the levels, that markets can go to and wait for ratification before further commitment of an investment nature.
3. Have reasonable expectations. Don't let irrational exuberance take over.
4. Always remember, why are you trading.
Additionally, hope is not a trading strategy. Beware of the tendency to trade on the hope and desire to recover production losses immediately. Traders should base their trading decisions more on thoughtful strategy and evidence than hope..
Besides, I don't think, what is this – act of courage, to try to trade from both sides of the market, when variability is intense. Certainly, I trade both trend and countertrend - but that's for regular markets. From september 2008 I didn't take a lot of anti-trend industries, I left a good amount of assets in cash, and I didn't trade as often. I know, what a lot of services says, make the most of this variability, but a few mistakes or a small violation of discipline can create devastation.
So, within the context of the market environment, I have chosen stocks with a specific set of fundamentals, which i love. Then I use technical analysis, to facilitate the timing of entry and exit. If a set of ups doesn't work well, money management rules prevent, for the little tramp to become an avalanche.
Another important rule, never argue with the markets. Respect the market and believe, that the market is always right! I flinch, when I read about "the need to tame the market animal." In my humble opinion, the only way to beat the market is to, to tame the animal within! Trading isn't just about coming back or beating markets. You also need to address all the traits in your personality., that affect your trading. After that, you must use your powers, managing your weaknesses.
Looking at the big picture, if it's dirty, cloudy, and dangerous in the markets, how many you want to expose to the elements? You let the markets tell you. Once the environment clears, You can return to, and happy days are here again.
Damian: What signals are you looking for, to know, are the clear and sunny skies here again in the markets?
Infected: I have done fundamental research on, how bear markets have ended in the past 100 years. The results are summarized in the Market Speculators Timer, Minyanville bulls. I use these signals to show the path as the market turns. I also wrote about this in the Mignanville Buzz & banter. Again, as long as you trade with very strong money management rules, You can make up your mind. For example, I did, for money management to decide, that I never break: I don't keep stock at the time of his income announcement. I prefer to sell before income and repurchase, if i like it, what i hear and see. As Donald Rumsfeld says, “We are trying to reduce the unknown unknown factor.” Mostly, there is a known unknown and then an unknown unknown. For example, we know famous unknowns: we know, what we cannot know, where a certain stock is headed or how income will be on a known income date. So, we can take care of the known aspect of stock trading. That, what we cannot do, is control unknown unknowns. For example, if the biotech company says, that a certain drug had adverse effects, we cannot control this. So, to reduce the risk in these situations, we can avoid biotech trading companies or holding stocks during income announcements.
Damian: Seems, what's the main factor here – discipline. You are known for, that you had extraordinary discipline as a merchant. Discipline – rare and challenging skill, to support. Where did you learn to discipline?
Infected: While I naturally tried to discipline myself throughout my life, I admit, that trading requires a degree of discipline, which most other habits do not. Think of trade as a war: we deal with a constant flow of information, and we must manage our reactions, expectations, and emotions. We must constantly be aware of, what happens and can't let our guard down. If we are hurt, we must rely on elasticity, to bounce back, as if nothing had happened. Such an action, day in and day out for years, is very difficult. Since I said earlier, a slight violation of trading discipline can unleash financial devastation. Interesting, do the Merchant Gods know about these rules, since minor violations don't go unpunished! I have also consistently used disciplinary methods from Behavioral Economics, Psychology, and personal trading events. As a side item, I majored in Psychology and Economics, getting my bachelor's degree.
Discipline is incredibly important, because, as i said earlier, nobody looks over your shoulder. There is no agency, with which you can start a complaint, “Stock was not intended, to go down ..., it released a lot of income!”You can only react as a person - which means, what discipline – Your only defense.
Besides, I do not engage in the relentless pursuit of cultivation when it comes to trading discipline. We all know, that improvement doesn't work in trade! I think, that consistent discipline can be maintained, while discipline errors are minor, trade errors are not compiled, staying with them, and the merchant's ability is not seriously impacted.
In reality, trading taught me more about discipline, and not vice versa. From time to time you go. From time to time you run. Sometimes you sit by the side of the road. But in no sense can you lose sight of your destiny.. As Edmund Hillary said, “This is not a mountain, which we conquer, but directly. " I do strictly, that things hone my discipline, this way my trade can be positively influenced. If you want to excel when trading, first erase those New Years Resolutions and see them through December 31st!
Damian: You've mentioned risk and money management many times.. In my humble opinion, I think, what they – The Holy Grail for successful investment and trading. You can share more about your strategy in this important area.?
Infected: I would be happy to. All risk management comes from a complete introspection of the investor's personality, then setting up the appropriate trading methods. Some of the questions, which I asked myself, Were:
What are my goals from trading? Are my expectations realistic??
How much time can I devote to this pursuit of profitability?
I guess, that I am emotionally elastic? I can let go of painful and upsetting situations, or I tend to relive them many times?
In which markets am I more convenient to trade? Range bound or deviating?
I – more convenient trading multiple stock positions or indices?
How do I share the risk within those stock positions? What is my optimal position size? Those positions are adjusted for the variability of the stock?
I feel comfortable short selling?
What is the time frame for my trades?
What kinds of stop loss do I feel more comfortable, carrying out? My discipline requires solid or mental Stops?
Trade provides me high? (Real trading can actually be quite boring.), I can use the same trade settings many times and not fall asleep in the wheel?
I have already discussed capital preservation, but this is the main thing for my trade. No genius, neither size can necessarily survive anomalies. Look at the spectacular collapse of Long Term Capital Management or even Amaranth's Advisors. They went from that, to be higher by 22 % to below on 36 % in one trade 2007!
I also understood, that killing the biggest and most successful traders was their actions after losing streak. My trading rules enforce mandatory, closed after such a losing streak. This is due to the fear of, to be what “Blind Thinking” Malcolm Gladwell's claims. Poor account performance leads to poor risk assessment of event probability. Merchants bet more aggressively, if they took out a losing streak, as many regional players will testify.
On the Buzz & banter, I often discuss the interaction between emotions, risk, and technical analysis, because emotions – the real reason behind risk hassle.
Damian: About emotions, when you look at tape and charts, what signals are you looking for, to determine the psychology of the market?
Infected: i look at hundreds of charts a day, including indices, market sectors, key reserves, as well as market statistics. Together they paint a picture of the collective emotions of traders and investors in the market.. Whereas one particular value is not enough, to draw conclusions, when combined with recent history as well as historical precedent over the past several decades, You can begin to draw intelligent conclusions about feeling and how the market is, probably, will react to this state of feeling. While every market condition is different, investor and trader psychology tend to remain the same - oscillating between greed and fear. It's finished in sample charts, which can be learned to interpret over time. Of course, it is impossible to predict, what will happen in the future. Skill – all about getting an edge in probability estimation.
Damian: Please tell our readers about your TraderVantage company and what you specialize in?
Infected: Over the years people have approached me, wishing to learn about various aspects of trading. I think, that there are three kinds of people in financial education. Firstly, they, who offers cuts and paths to alleged "instant wealth." Second, they, who belongs to financial media, but who has a little personal experience of the market. AND, third, they, who offer their own expensive trading programs. I do not belong to any of these categories. As a merchant, I firmly believe, what trade – difficult pursuit, which requires management stock and market analysis, money management methods, market sense indicators, and separate psychology.
Early in my career, i used part of stock advisory services. I got it, as soon as I got the inventory list, i will do my own due diligence and buy that, what i felt like. I didn't make a lot of money, nor did I learn anything about the methodology behind industries.
So, TraderVantage – my way of sharing a piece of knowledge and insight, which comes from spending tens of thousands of hours with tape and proprietary trade patterns, which allowed my personal success. I sincerely believe, that the markets are not going to be easy to spend many years. So I hope, that these resources help people improve their trading and investing skills. I am trying to ensure this through our Staff., Exchange Mentorship Program. We have also consulted with Obstruction Funds, watching, improve their trading methodology, and through fundamental and technical analysis.
Damian: I spoke to Todd Harrison, President of Minyanville, and he only had big things, to say about you. Definitely, he said, that you “embody everything, what Minyanville hopes to be. ” What personal philosophy has led your peers to praise your character as well as your skills?
Infected: Todd has a way with words. I am deeply humiliated and honored at the same time. People are led by different things in their lives.. When you come across those, who is on the same path, there are joint actions. This – then, where Todd and Minyanville enter. This – really not about me Damian, I guess, that I support ‘responsible investing’ - the only way investing has worked in a long time - which is Minyanville's main message. My personal philosophy has always dictated, what, to make a big difference over time, i have to have small values every day just the same, like 'long term’ composed of many short terms.
So, over the years I have been interested and concerned, to see, that people are losing their wealth, health, and relationship, because they've never been taught basic things about management money. Our education system teaches us a lot, with the aim of making money through a successful career. But there is very little education about how, how to handle money, how to avoid or minimize debt, how to increase savings, or how to invest wisely, to grow real wealth over time.
IN 2004, I went through a terrible personal tragedy, during which I questioned the basic premise of my self-chosen profession. My father was the victim of a robbery. He was killed for a small sum of money. It completely turned my world upside down. Don't get me wrong. I love to trade, markets, and persistent problems, which they bring. But I started to wonder, “What is the social value of a good merchant??" My sisters, everyone – doctor and other engineer, both had jobs with social impact. I wondered, how my profession could make a real difference in people's lives?
I decided to channel that feeling of restlessness into a mission of helping people manage their money more responsibly.. I wanted to influence, how people think about money. I wanted to help people use the power of financial education to make their dreams come true, rather than random buying and selling, what the popular financial media has highlighted as story-du-jour. I started teaching at many levels. I showed up at school sessions in front of the kids. I mentored individual traders and investors.
There are no matches. When you really want to do something, you will find the way. When I came in contact with Todd and Minyanville, I understand, that our “mission” was like. And there was a guy, who abandoned an illustrious career, to do great things for others. An act of bravery I must say.
Minyanville – great community, where people meet without hidden agendas. We are working, to help and learn from each other towards a common goal. I am fortunate to be a contributing member of the Minyanville community..
Damian: Who influenced you the most on your trip and how?
Infected: I am very fortunate to have many mentors on my life's journey. My parents always believed, that women can do anything - and my mom was especially one of those women. She received her Doctorate degree in the 1960s, when women were still not as active in the workforce.
So, when i realized, what is my husband (Sumit Sadana) it was very interesting in the markets, trading with his glass ceiling was a natural problem, which attracted me to this profession. I actually discussed and discussed a lot of my ideas with him and still continue to do so today.. I rely on him for his excellent fundamental analysis and back-testing interesting new strategies with me - not just opening jars!. I got a lot of lucrative job offers along the way, but they paled in comparison to the problem of the markets offered.
One of the first turning points in my trading career came in the mid-1990s., when I started learning about Technical Analysis through Don Warden Telechart. Since then, I have read numerous Books in Technical Analysis and has absorbed and adapted many different trading philosophies. I – also a hot student of psychology and believe, what real heroes – people, who have succeeded despite their failures in life. In that context, I am interested in collecting quotes from great people - this interest was a legacy, which I got from my mother. The wisdom from these real-life heroes helps me in my personal growth..
Damian: You first approached me as an interview answer, i did women highlighting professional traders. You can explain your feelings and experiences with women in high finance?
Smita: Good, Damian, You touched that, which I am very in love with. Money management was dominated by men, since they were the ones, who traditionally made money. Many women have been eliminated from entering this area due to the concept, what's the governing money – all about crunching numbers and complex formulas. But times are changing. Finally, this profession – relatively recent phenomenon. trading, because the profession – product of the mid 90s due to the advent of the Internet, free passage for brokers, and ubiquitous financial information.
I also noticed a relatively recent phenomenon, where women are tired of, not to be actively involved in financial affairs. I call this the "Mad Honey Phenomenon." Women Start Taking Steps Towards Financial Education, income commensurate with their power and longevity. This remains the next frontier.
So, while success in this profession offers a sense of personal fulfillment, I acknowledge and respect the fact, the market doesn't really care, who is trading on the other side of the screen. Age, floor, even experiencing, doesn't matter so much, how much commitment, to discipline.
And who knows...maybe, my foray into trade will also encourage men to experience Latin dance class in my gym. So long, only a few brave souls venture into [laughter].
Damian: I am excited, to watch, what are you driving for girls, like my new daughter!
Infected: Thanks!
Damian: Most traders spend a huge amount of time, consumed by their work. but, I read, You are active in the performing arts. You can tell us about this extra passion of yours?
Infected: i used to be very active in the theater among many other activities. It was during my university days. I actually won a major National level competition in India. Now, my interaction with the theater – only casual interaction from the other side of the stage - as an audience member!
but, that experience also influenced my trading tremendously. Rehearsals put you through a grueling regimen of patience and discipline. You learn to read emotions, since you have to reproduce them. Finally, a live concert prepares you for, that you dealt with troublesome problems in real time! Ah ... I really miss that time, but i guess, that I should be content with seeing live drama in the markets, everyday [laughter].
Damian: Infected, You – very interesting person, and I really loved to get to know you better. I hope to stay in touch, as my daughter is looking for great role models!
Infected: Thanks, Damian. I'm looking forward to it too. It was a pleasure doing this interview with you..
