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! =)
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:
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