The Long Run checkpoint — years, records, and the edge of the subject
Course capstone, and the end of the psychology domain. Four units ago a drawdown was a number on a chart, a decision was judged by its outcome, a routine was a nicety, and every problem with markets was a markets problem. Each of those is now something you can measure, or refuse to.
The course in one architecture
- A drawdown is lived, not read — three years of it does something to a person that no account of it prepares them for; doing nothing is the hardest action; the bottom is the easiest place to sell; and surviving one changes what you do after (Unit 1).
- Measure yourself, not the market — a good decision and a good outcome are different things; there is a specific list of what to write down to catch yourself later; your own records say things about you that you would never guess; and a broken process and a bad run can be told apart, with enough of them (Unit 2).
- A practice you can sustain — a position needs far less attention than it receives; a routine protects what a rule cannot; telling someone what you own changes what you do with it; and markets stopping being interesting is a recognisable state (Unit 3).
- Where this stops being about markets — some problems are no longer markets problems; some things traders say about the mind are true and most are folklore; some of your problems are not psychological at all; and the course ends on what you learned about your own decision-making, which is the only thing it could end on (Unit 4).
The sentence, decoded
"I have been down for two years; my process is probably broken, so I am changing everything." Run it through the instruments. Down for two years — inside what a drawdown does to judgement, with the decision being made by the person it has been working on (Unit 1). Probably broken — a claim the records can test, and only the records: how many decisions, how many were good ones with bad outcomes (Unit 2). Changing everything — the opposite of a routine, done at the moment a routine exists for (Unit 3). And if two years of it have stopped being about the account, that is Unit 4's question, and it has a different answer.
Where this connects
The statistics course in the Market Data domain is the arithmetic behind "broken or unlucky": how many years it takes to tell a mean from zero, and why two are not enough. The performance course in the portfolio domain is where a process is measured against a benchmark rather than against a feeling. And The Open Position, before this one, is the same subject on the scale of a single trade — the moments this course's records exist to catch.
Checkpoint
The exam ahead draws on all four units. The bar: a situation described over months, and the ability to say what should have been written down, and what the record would have shown.
Before you sit it
Each of these is a minute at your desk. Any one that is not names the lesson to reopen first.
- Say why doing nothing in a drawdown is an action, and what makes it hard — Why is doing nothing the hardest action to take?
- Give one example of a good decision with a bad outcome, and say how you would know — How do you tell a good decision from a good outcome?
- Say what a record has to contain before it can tell a broken process from a bad run — How do you tell a broken process from a bad run?
- Say what the limits lesson refuses to do, and why a markets course has to draw that line — When is this no longer a markets problem?
Try it now
- Write the one-sentence version of each unit from memory — four sentences, your pocket card. Do this before opening anything.
- Then look at a drawdown the way unit 1 describes living through it, at the range where its length is visible:
Measure 9 October 2007 to 9 March 2009, then from that bottom to the day the line first exceeded the 2007 peak. Write the number of months in each. The measure tool also reports the number of bars, which is the count in trading days. 3. Finally, open the record you have kept since unit 2 — or, if there is none, write today's entry as the first — and answer the course's last question in one paragraph: what have you learned about your own decision-making? If the paragraph is specific, sit the exam.