March 30, 2013
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Trading Update: 032513 – 032913 plus Month/Quarter Performance
My whole shebang weekly/monthly quarterly update….
As the week went, so went the month. As the month went , so went the quarter. One word to describe all three- meh.
This week my mind was sent on a direction trade that never hit its target point although I felt near certain it would. Instead, it would move towards it, then move away as the market slowly edged against my position. The end result was my target was never hit and I gave my profits back to the market..again.
It’s a good summary for the month’s performance.March Performance
Definitely a retrograde performance month for me. Apparently I entered the “Bizarro Universe” where you start out with high gains and then seek to give it all back….doh!
Was this a result of my new methods of hedging? Nope, it’s due to me NOT hedging when I should have. This is basically a pure directional trade that I’m “patiently” waiting to hit the intended target price range. This also highlights a critical fact that I need to remember:
My directional methods typically accurately determines the markets destination, but not the path it takes to get there.
What that means is if I make plans for the market to make a bee line to my target price level, there’s a good chance the market will have other ideas and tell me to think again. You’ve seen this in my past performance charts on several occasions (ie “roller coaster” charts).
Hedging is supposed to solve this issue by taking advantage of the path taken while I wait for the target to get hit……that’s IF I use it, but I wind up standing in my own way.
This is what happens: I get to a hedging point but I feel so certain that it’s going straight to my target that I don’t initiate the hedge, thinking I’ll be reducing my profits needlessly. Then when the market proves my feelings wrong, I miss out on the hedge move. This happened so many time these last two weeks, it’s a bit embarrassing. If I had properly hedged, this month’s performance would have easily been 15% – 20% if not higher.
Another key mistake is I should never let a 25% gain turn into a nominal return – at a certain point you have to lock in gains to prevent the reversal I experienced. At a minimum, I should have retained at least 10% for the month.
One thing I didn’t take into account (again) is that the market was nearing all time highs- and when that happens signals that typically pan out don’t work, even my home brew ones. Certain forces were intent on getting to an all time high so any market weakness was quickly countered with more buying. Indicators that typically moved in the opposite direction of the market were overpowered by the market’s singular intent to break records, and lo and behold, we hit all times highs in the S&P 500 this week. Still, it wouldn’t have mattered had I been taking the appropriate hedges.
March Performance vs Indices
This lackluster month also seals my fate for the the quarter as well.
1st Quarter Performance
1st Quarter vs Indices
Clearly this isn’t performance to be proud of.
A big bunch of meh. That said, despite the bad quarter, surprisingly, I feel pretty upbeat going forward. That’s because I know exactly what caused my problems this month and I have solid solutions for them. In addition, I gained some new insights that will significantly improve my precision in entries/exits.
Here’s one big solution that I’ll share: I’ve reached the stage where I can make my trades semi automated by putting in my calculated entries and exit targets in advance. Yet, silly me was intent on hedging via trading live. Since I know now I can’t be trusted to follow through on hedging live, I’ll just put in my hedge price entry/exit levels in advance as well. I don’t know why I didn’t think about doing this earlier. This leaves me to focus more on the accuracy of my analysis rather than keeping an eye on trades throughout the day or night, which also solves the problem of having to stay up for late night monitoring as well. Life just got simpler.
Lots of lessons learned this month and quarter- now to see if I can put them to proper use going forward.
