Hey Guys,
What a roller coaster of a day yesterday. The market started out a bit up, and then it came down hard. Then with about two hours to spare it went back up some, which seemed to put my options trades into a decent position to potentially get a few victories, but then in the last 45 minutes it came crashing back down.
These are some tough market conditions! But these are not new. We have definitely seen conditions like these in the past. They happen almost every year at some point, and sometimes multiple times per year. The results of trades during times like these are baked into the back tests I ran.
The challenge: we can't control the market, and it's very hard to predict where it's going next. We can only lean on the information we have to make trading decisions, but once the trade is up, we have no control over where the market will go. Earlier this year when there was talk of inflation, it caused bouts of market volatility that almost immediately spiked back into a booming market. I'm not sure I would have expected that, and it goes to show you never know what's coming next. That's why I commit to taking the trades that set up from back tests and let history guide the way for me. The hardest part of trading might be learning to live with the consequences when the market doesn't go our way, especially since there is a very real risk involved and we can never tell what will happen next.
I hit the stoploss on two of my MES futures trades yesterday (one during the day and one overnight). So I essentially gave back the gains I had made on those MES futures wins the week before. Even though those two futures trades took losses, I would do those trades over again in a heart beat if they set up. The reason is because those strategies perform well in back tests. It's not like they never lose (every single trade strategy in existence loses at times), but back tests suggest that more often than not, those trades might have been profitable. There will indeed be times where they lose, and where losses bunch up. We just saw that over the last few weeks. There are cases like that at some point in most years. But back tests tell us that over time, these strategies might pay off despite occasional clumps of losses. If we can learn to live through the periods where the market doesn't go our way, that might be the key to unlocking the long term potential of these trading strategies. But there is a very real risk involved and we have no control over the market, and that's what makes it so challenging.
By the way, the stoploss I hit for one of my futures trades (MT 95) happened overnight. The futures market is open 23 hours per day, so sometimes exits will get triggered after hours. For those of you who used SPXL to follow that futures trade, though, you might still have that position open since SPXL trades during normal stock market trading hours and its stoploss hasn't yet been hit.
My KLAC stock position hit its stoploss this morning. My other stock positions have been holding pretty steady through a lot of the market volatility, although TSCO is down at the time I'm writing this.
I did pick up another futures trade position this morning. There haven't been any stock or options trades yet that have set up today. Things right now are not typical. At most times of the year, I have a lot of stock and options trades and very few futures trades.
If you have any questions or feedback, I'd love to hear from you.