Well that's not exactly my favorite way to start the week! Monday morning is giving us a major red day in the market. The S&P 500 gapped down overnight and then dropped a bunch more to start the morning. It triggered stoplosses in my stock positions for ACN and AWK as well as one of my futures positions. My portfolio is noticeably down right now.
The interesting part: I'm pretty calm right now. Part of the reason is that I've been through this many times before. This is a drawdown, which is a normal part of trading. Over the last year in particular there have been many periods like this where the market gets volatile and tumultuous. I'm used to it. Sometimes I'll get a strong emotional charge in a drawdown, but at least for now I feel pretty calm.
And that ability to be ok during a drawdown actually might improve my odds of making solid profits over time. There is very real financial risk with every trade, and that's one of the things that makes it so hard to live through the drawdowns. But if we stay in lock step with the back test, evidence suggests there may be a reward for hanging in there. There's no way to be sure of that, but having an ability to withstand drawdowns is going to be critical if you plan to stick with trading for the long term. It doesn't matter if it's this trading approach or a different one -- there are going to be periods of drawdowns.
If this drawdown feels too intense for you, one possibility is to lower your position sizing to a level where you can tolerate a drawdown more comfortably.
So I'm going to stick to the plan like always and will continue taking the trades that set up, just like the back test. I picked up two new stock trades in the main account (Hilton and Fedex). I didn't have enough buying power to take on new positions in that account when the morning started, but after those stoplosses got hit, it opened up buying power for me to take on new positions.
In the extra options account I took on four new positions across four different industries. I feel good about the diversity of positions I picked up today in that account. I didn't take on any new trades in the low-priced account because I'm already filled up to the max with positions.
If you have any questions or feedback, I'd love to hear from you.