2018 Incident Report (Part 5)
Posted by Mark on June 2, 2020 at 07:58 | Last modified: May 13, 2020 11:19Once again, today I continue with an unfinished July 2019 draft evaluating my 2018 trading performance.
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With regard to getting out, I wrote to colleague FM:
> As I said, I want to be out when the market gets volatile because
> all of the largest market crashes have been preceded by some sort
> of craziness. The trick is getting out too soon or too late and
> there is no magic bullet that will work for all occurrences. In
> general, though, “craziness” involves wide market swings, regular
> 1+ SD moves, longer-term moving averages being pierced to the
> downside, VIX levels breaking through resistance, etc.
>
> I had a mental stop at YTD profits for my account. Once those
> evaporated I got out—and in retrospect, I’m glad I did because had
> I not then I certainly would have the very next day with much
> bigger losses.
>
> …I know you got frustrated previously seeing $307K go down to
> $251K so I closed [those] positions… to preserve some gains.
>
> With a sliver of [the] portfolio invested in NPs, one could make the
> case for me to keep trading [the] account per usual. The benefit of
> getting out would be to prevent even [that] sliver from incurring the
> biggest losses because at some point, there will probably be a major
> market crash on the order of 20%, 30%, or more. Trading this way,
> I can probably avoid those excess losses. The right answer is
> only knowable in retrospect.
Colleague FM responded:
> Your response is consistent with prior concerns about managing
> volatility. The backtest through 2008 seemed to produce very good
> results and I am not sure why volatility this year would be especially
> concerning.
>
> Regardless, much of your trading is based on how you feel about the
> market; which is not atypical of traders. However, if you are trying
> to sell a methodical, long term process, you will have a hard time
> as there is not a definable structure.
I’m actually trading larger and with more variable capital than done in the backtest. This may be part of the problem.
If I were just trading OPM then I would commit to trading consistently and regularly. I might have to stop trading my own money, though. I might also have to somehow separate myself from the client. Talking about this in times of market turmoil puts me even more on-edge since I always want to be cautious, qualify what I say, and not be too arrogant so as to be subsequently bitten in the behind due to excessive hubris.
I will conclude with my next post.
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