Trading Update: January 2015 Performance

January’s performance was on track for quite a respectable month, until I got Murphy’s attention…

That’s right – it wasn’t long after I made my post that proclaimed my “evolutionary” upgrade in trading awareness/knowledge, that I had my “Give me the ball coach!” moment to prove I’m not invincible….yet! =)

January Performance

Jan2015_performance

Okay so here’s how the month transpired…

Taking my trades using my updated system that I verified last December was still proving to be quite successful. Actually it was “so successful” that I was starting to have a problem with it. The problem was after I completed a trade and took my profit, the market continued to move in the same direction by an extended amount, which made me think of all that “extra potential profit” I left on the table.

Now this type of thing happens as just a part of trading from time to time, but it was happening just about every time with my new system, so it started to weigh on me. My system can determine the minimum profit exit target that’s highly likely to happen but that’s just the minimum – it can go much further.

So now that the holiday season was over and I was back in town I decided to start experimenting to see if I could optimize my system to capture more of these extended moves.

I also grew impatient  waiting for my exact trading set up when I saw the market producing so many moves I couldn’t take advantage of since it wasn’t part of my expected move. This led me to start considering new positions that looked like they should also work.

Then on Friday, 1/30, the market produced this type of chart:

Chart of GLOBEX~@ESH5_1_30_15

 

This is an expanding megaphone type of move that happens when there is a violent struggle for dominance between Bulls and Bears. This can mess up many trading systems that are looking for a definite Bullish breakout or Bearish breakdown and generally confuse folks as what the market will do next. This is a great market move to see how one’s system holds up under fire, but not such a great one for experimenting on since there are so much whip saw moves going on.

So I picked the wrong day to be bold and brash and the market made me pay. Even worse, I had grown so confident that I loosened my risk stops, which made the losses that much worse and wound up flattening the month.

At the end of the day, I felt the double whammy of a big loss for the day, and having to post the results right after I made my blog about moving to the next level….doh! It’s like the market heard me and decided to show me who’s in charge. =)

So that was the dark cloud of Friday’s trading. But there is a very bright lining as well. Analyzing the market’s movement at the end of the day showed my trading system was fine, I was the one who mangled it up. While the losses were no fun- all the experimental trades and massive market gyrations opened up new doors of helping me see new strategies in capturing more big market moves. It also drove it home that I should not be changing my stop loss settings once placed. If my stops trigger, that’s the best signal that there’s something wrong with the current trade plan. One big difference between “2012 me” and “2015 me” is that “2012 me” went stopless most of the time while “2015 me” ALWAYS has stops in place.

 

 January 2015 Performance Versus Indices

Jan_15_Vs_Ind

 

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6 thoughts on “Trading Update: January 2015 Performance

    • My system focus is classic style graphical chart analysis mapping resistance and support areas. All the zig-zags together tell an accurate story about where the market is likely to go. Like any foreign language, it’s important that they be accurately read to avoid miscues.

      Take the above megaphone pattern for example. I have no doubt that there are least a handful of people who focus on megaphone patterns since while rare, they produce monster swings. A seasoned successful megaphone trader would have picked up on the pattern early on which would have produced several excellent entry points in advance. Based off experience with those type of patterns the trader would also know what the most likely minimum move would be before there was any possible reversal move.

      All the measurements/drawings are being done in real time, so one has to be accurate and know what they are looking for being mindful of the clock. Inaccuracy can make a Bullish break out look like a Bearish continuation and vice versa. Of course the market doesn’t make this easy – imagine trying to learn a language that’s really a composite of multiple conversations in different dialects going on at the same time. One has to separate distinct conversations in addition to interpreting the meaning.

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        • There are people/companies selling special algorithms that they claim give out great trading signals. However, I haven’t heard of anyone using them with long term success from all the trading blogs I’ve seen. It makes sense, since if what they were selling were guaranteed money makers, you would have to question what would motivate them to sell such a system rather than use it themselves.

          In a world of HFT traders and Ivy League grads employed by the top banks to create winning trading code, the more automatic and high tech one goes, to more you compete in their territory, which isn’t a good place to be compared with their vast resources.

          I’ve looked for such “short cuts” in the early days of trading, but I’ve come to the conclusion that one must develop their own special short cuts to move forward.

          Being artisan in trading has distinct advantages. Having a more manual process means it’s not easily duplicated which means a working method has a better chance at longevity since any “edge” that becomes widely known is neutralized. The key skills resides with the trader properly applying the system rather than the system itself.

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        • Well, I agree with what you wrote. My interest comes from the fact that I am forecasting budgets and costs regularly and usually use “instinct” when making the final call. Of course, I have a data basis to build on, but it seems rather low tech.

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  1. Pingback: Trading Update: Performance Stats Preface – The Ugly, The Bad , and The Good Part 1 of 4 | Soullfire

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