Hey Guys,
Well that was a beat down. The market tanked since my last email, and the S&P 500 went down 100 points to around 3,920.
Most of my positions got hammered. Yesterday KHC had one of the biggest red bars you'll see. If you look at the average distance its price traveled per day for the past two weeks, its red bar yesterday was four times that amount. And I had stock and options positions for both the main strategy and double down strategy.
And then in case yesterday's pain wasn't enough, we woke up to find out that Allstate gapped down big time overnight. That was another one where I had two helpings of both stock and options positions. The gap down caused my exit price to end up being below my stoploss price, meaning I ended up with oversized losses on those positions.
That was a major stinger. And it's a good reminder of the risk we're taking by doing these trades. I have lived through days like this before, and I will live through them again. Some days have substantial losses, and to my mind there is no way around that with trading. So being able to cope with those days could actually be a key to achieving long term success with trading.
One way I cope is by zooming out my perspective. For one, I remind myself that I'm still in lock step with the back tested trading approach, and in the back test there were drawdown days like this too. My goal is to mimic the back test in real time, and I'm successfully doing that right now.
Another thing is to look at some of my own past success. In the main account, my win-loss record was 55-23 in the prior three months before this week, with a 20% return on account. And in my options account for those same three months, I was 42-17 with a 61% return on account. So I can take some lumps here and it's not the end of the world. Zooming out my focus helps me keep some perspective and stay grounded on drawdown days like today.
I picked up a bunch of new positions today. In the main account, I bought stock for L and JPM. In the options account, I bought options for JPM. In the double down account, I bought stock for CB, NTRS, and FITB, and I bought options for AAP.
Note: in the main account and options account, I limit myself to 2 positions per day in order to stay in line with the back tested approach. For the double down account, the only limit to how many positions I take in a day is my available buying power.
If you have any questions or feedback, I'd love to hear from you.