Hi Guys,
We are right smack dab in the middle of volatile market conditions. On Friday, by the time the day closed, the market was way down. This morning it had a great gap up, and then the market dumped right back down to around where it closed on Friday.
I've got a whole lot of positions open right now. When the market pulls back like this, it often triggers a lot of pullback trades. In particular, I have four separate MES futures positions open right now, each with 4% risk. That's some heavy exposure. I'm directly following the back test, and right now it's a big load. I also have a ton of options positions open in my extra options account.
When the market pulls back like this, and the account value goes down, and there are trades setting up left and right, it can be challenging to stick to the plan. It can feel hectic and messy, and there can be fear about the risk involved (not to mention anger sometimes!).
As challenging as those emotions are, it's a great opportunity to learn. Are you comfortable with the risk involved? If your blood is absolutely boiling right now, or you feel so much fear that it's almost unbearable, or you're having trouble committing to new trades, then that might be a sign that your position size is too big. Remember: we aren't even into a truly deep drawdown yet.
In my mind, the key to reaping the potential rewards of this program is longevity. If the emotions are too extreme for you in the environment that we're seeing today, that's going to make it really hard to stick to it for the long term. This program is not aimed at making a fortune overnight, and therefore having patience and taking the time to find the position size that meets your comfort zone could pay off big time in the long run.
It's worth pointing out that market pullbacks like these might offer lucrative trading opportunities according to back tests. The market certainly has eventually rebounded every time so far in 2021, although the depth and duration of the pullback has varied. This doesn't mean that the market will be going up from here! There is very real risk involved. But it does mean that sometimes buying in the heat of a market pullback can reap nice rewards.
I manually closed FISV this morning since it hit its time limit. Also, my WM stock trade reached its profit target. Nice to lock in a profit in the midst of market turmoil!
If you have any questions or feedback, I'd love to hear from you.