1987 marked the attainment of Young Ray’s quest: to secure relatively consistent results. But I found that there was still one major lesson to learn. Joseph Campbell says that after he secures the treasure, the Hero encounters smaller difficulties. In my case, there was a most important lesson still to be learnt.

Let’s fast forward around 10 years. By then my VAMI calculated from 1990 stood at $52,640. VAMI stands for Value Added Measurement Index. Based on the trading results, it calculates what a theoretical $1000.00 would be at period X. I was happy with the results - I had recovered my losses and more; I was making a very comfortable living from my trading; and for personal reasons, I was also contemplating retiring and because of my trading I could afford to if I so chose.

The market has a habit of taking us down a peg - at least once in a while. In my case, that period marks the beginning of a 3.5 year drawdown where it seemed that everything I did resulted in a loss. The consistency of my results was numbing. Nothing I did would end the slump:

• I took time off
• I analysed my results
• I considered if changes in market conditions meant that my model of the markets no longer provided an edge
• I reduced position size to ease the pressure.

Losses upon losses. The maximum drawdown was around 23% - so as losses go, the results weren’t that extensive. It was the fact that profits were not forthcoming.

Finally I walked away from the markets for 6 months and that did the trick. In the 6 months after I returned to trading, I had one of my best years. From that experience I developed the Ebb & Flow theory of Position Sizing. And, this concept has so far saved me from any more extensive drawdowns. This is not to say that a prolonged drawdown can’t happen again; but I can say it is more unlikely.

There is little to add to the story. Campbell suggests when the Hero returns after his quest, he finds his world changed. Campbell was right. Trading has taught me, among other things, self-awareness, discipline, perseverance and to hold out a helping hand to anyone willing to accept the help.

I love trading - I wouldn’t do anything else.

Next week - back to the markets and a full analysis of my range of instruments: from ES to FX to Crude etc.

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