Hey Guys,
The market took a big dive yesterday. It had one of those giant red bars. And that did not bode well for my positions.
A couple of my positions hit stoplosses already this morning, and a whole lot of other positions are down too. That double down position on AMT bit me. That stock had a truly stunning drop in price over the last few days. And AMT isn't the only one. Many real estate and healthcare industry stocks got crushed over the last 72 hours, including a number of the ones I bought. My options positions in particular are suffering.
This is a taste of a drawdown. This typifies the type of challenge we face when trading. This is the moment of truth for us really, because these types of drawdowns are going to happen repeatedly over time. Can we find a way to stay cool through a drawdown and stick to the plan? There is no way to predict the future, so we take the approach of using history and back tests to try to put the odds in our favor. But that doesn't mean we win every time. There will be losses, just like we're seeing right now.
When the market first opened today, here is what I personally did to stay grounded. I initially looked at my account balance and saw that it was much lower than it had been at the close of the day yesterday, and it sent a nervous jolt of energy through my body. In that moment, I was able to accept that nervous energy. I didn't let my mind go down the rabbit hole of catastrophizing. Instead I let go of any thoughts and trusted that I was ok and that it was safe to feel the nervous energy. So I rolled out the red carpet and invited it in. And since I was fully accepting of it, I was able to experience the feeling more matter-of-factly rather than judgmentally. In this case, the nervous energy dissipated several seconds later and I was able to go about my morning with a relatively calm composure. It admittedly has taken me a lot of practice to become good at that, and it's still a practice to this day since I'm not perfect, but accepting the feelings and trusting that I'm ok has at times had a profound impact on my ability to stay grounded while trading.
I loaded up on new positions today. The back tests I did support pullback trading. So when the market comes down, more often than not it might recover according to history. With that being the case, market drops present an opportunity to buy. I bought a full load of positions in all three accounts, including a futures position in the main account (the MT 71 trading strategy for those interested). There's no guarantee how these trades will perform, but my goal is to stick to the plan and follow the back-tested strategy in lock step through thick and thin.
I have a number of options positions that are reaching their time limits today. I am going to close those right before the stock market session ends today.
If you have any questions or feedback, I'd love to hear from you.