Hey Guys,
Between the time I wrote my last email and right now, the S&P 500 has dropped another 150 points. So far, we just haven't seen the buying pressure step in yet like we have so many times in the past year when volatility kicks in. Sometimes that buying pressure comes when you least expect it. But there's certainly no guarantee if or when that will happen this time.
I took more losses this morning with the market drop. My stock positions on AIG and SYY hit their stoplosses in the main account. And in the low-priced account, JXN hit its stoploss and NLOK reached its time limit and was closed for about a half-sized loss.
I'm in the midst of a substantial drawdown right now. It's not something I take joy in. But this is what I signed up for. I knew there would be periods of drawdowns, and that the most challenging part of reaping the long term potential of these trades would be to tolerate them. There is real risk with each trade, and that's part of what makes the emotions so strong during a drawdown and therefore what makes it so hard to stick to the plan. This is that moment of truth where we're being faced with a drawdown.
A couple of things that offer us hope.
1) Last week was a big down week in my main account. But just 4 weeks prior, I had a profit week of equal proportion. You never know when the profit bursts are going to come. Just because there have been a batch of losses over the last several days doesn't mean all hope is lost, that's for sure. I've lived through drawdowns many times, and at some point sunlight has always started shining through again.
2) The market has pulled down very hard, very fast. Historically when it does that, there are decent odds that it will snap back to at least some degree, even if just temporarily. There are no guarantees though of course.
3) The back-tested trade strategy has a pretty good track record over time. You can review this page to remind yourself of what the big picture shows us. There have been plenty of drawdown periods along the way like the one we're going through now, but over the long haul we're working with a strategy that might be worth the effort.
I picked up a full slate of new positions today. I grabbed Wells Fargo and Marathon Petroleum in the main account. I also took on another futures position and posted its stock equivalent in that account. In the low-priced account I bought stock for Merck and Coca Cola. In the extra options account I bought options for MRK, CI, KO, and WFC.
If you have any questions or feedback, I'd love to hear from you.