Hey Guys,
The market had another big red day yesterday. The S&P 500 went down more than 60 points.
Considering that I had several option positions that were being closed yesterday at the end of the day, the timing of that market drop was painful. I did squeeze out a profit on my PANW stock position that closed this morning, but that pales in comparison to the losses I took on those option positions. They wiped out all the gains I had made in the last two weeks.
When I have an account setback like that, I like to zoom out my focus and look at the big picture. Back tests show that the road to long term gains involves lots of twists and turns along the way. Even in during profitable years, there are sometimes periods of substantial drawdown. I saw plenty of drawdowns with my live trading during one of my most profitable stretches.
So in other words, going through drawdowns is normal. Back tests make that clear.
That doesn't mean it's easy to live through! It can bring up tough feelings like frustration, fear, and/or anger. And understandably so, since there is real risk involved.
When those feelings come up, I like to step back and look at the big picture, and remind myself of 1) the deep decades-long success of this trading strategy and 2) the fact that it's normal for there to be drawdowns along the way. Looking at the big picture often helps de-intensify the emotions for me, which makes it easier to stick to my trading plan.
I took on some new positions today. I bought stock positions for SIRI and LSXMA in the main account, as well as an option position for WDAY. In the options account, I bought options for SIRI.
If you have any questions or feedback, I'd love to hear from you.