2012 Performance Evaluation (Part 3)

This blog series represents my 2012 annual review.  In http://www.optionfanatic.com/2013/02/12/2012-performance-evaluation-part-2/, I discussed my performance through 2007.

2008 was my introduction to full-time trading.  Faced with a market in correction, I traded much of the year with reduced position size:

This was not a cakewalk as my maximum drawdown (MDD) hit 20.9% in March.  While discomforting, if this were the worst MDD ever encountered on a year-to-year basis then I would be content.

My MDD was only about half that seen in the major indices.  I capitalized on much of the October-November tumble by purchasing put spreads.  I remember spending hours in front of the screen with my mouth propped open as I watched the horror of a market in free fall.  I felt bad for those who could only watch big retirement savings fly out the window from one day to the next because “buy and hold” was the mantra espoused by the financial industry for years and years.

My good fortune reversed in 2009:

What killed me in 2009 was a 27.7% MDD, which occurred in the span of two months.  This was another case of trading too large and being caught with my pants down when the market made its third and final thrust lower.  I traded small for the remainder of the year as I reassessed my trading plan.

In retrospect, what frustrates me is the need to experience this lesson multiple times before I learn it.  My first lesson was in 2007 when a couple sharp selloffs turned my huge, long positions against me.  In 2009, I saw this happen once again.

I will continue the analysis in my next post.