Hey Guys,
The market had a big down day on Friday, and then took another dive during the overnight hours leading into today. This is a very volatile period in the market.
I want to point out that the back test simulated trades right through these types of market environments. If the trade strategy criteria was met, the trade was taken in the back test. Since the back test is driven by an algorithm, there are no emotions involved for it. It simply follows directions repeatedly, like a robot.
Yet when we, as humans, try to follow the back test, it can be much harder! We have thoughts and emotions, and they can make it difficult to stay the course since we know there is real risk involved. That's why I always say that the most challenging part of making money with these trades (or any trading approach) is being able to live through the drawdowns. It can be hard!
Here's another way to look at it. My trading approach is largely based on trading pullbacks. When we're in a drawdown, does it mean that pullback trades have completely lost their edge? To my mind, that's highly unlikely. Over the course of decades pullback trades have reflected a very strong track record in back tests, despite repeated drawdowns. The challenge is that we don't know what's coming next in the market, so we don't know if, in the short term, we're walking into a drawdown or walking into a big profit bounce. There's just no way to know for sure. That means if we want to follow the back-tested trading approach, the biggest challenge might simply be to manage our thoughts and emotions through drawdowns.
It can be challenging, but I'm here for you! No matter how you decide to handle your trading approach, I fully support you.
As far as trades, I took a hit on Friday with losses on my MES futures trades. What a tough week for futures! Then this morning two more futures trades set up. One was based on the price being near the prior week close, and the other was based on there being a 10-day breakout to the downside. Both are forms of pullback trade opportunities for the S&P 500.
My EXAS stock position hit its profit target late Friday. Its price somehow drove up while the rest of the market was going down. I closed my CRM stock position this morning since it reached its time limit. That one took a partial loss. I noticed that OKTA and COUP are both holding their ground well. The market went down a lot since I bought them, but they're both hovering around breakeven. The performance of my stock trades has actually been pretty solid compared to how the rest of the market is doing. I'm not avoiding losses altogether, but I have some positions that have held steady through the storm.
I bought stock positions for KL and CTLT today. I also picked up options for NFLX, SPOT, and NTAP today. There were lots of other options trades I reviewed, but they were all too expensive to meet my Max Premium criteria.
If you have any questions or feedback, I'd love to hear from you.