A Rough Road

It has been a rough road recently for my style of trading. Many of the indicators that I utilize became extreme in November and correctly guided me through the November pullback in the market. In mid-December sentiment became extreme again and has stayed that way.

Since mid December I have been fully hedged and at times leaning slightly short. Luckily, I have been hedging through cheap options and my loss on my hedges is smaller than the loss would have been if I shorted the index. Up until last week my core longs and trades were outperforming the losses on my hedges so I was able to block and tackle my way to positive performance. Last week, both my longs and hedges went against me and took away most of that performance.

While I am not happy with the outcome, every style of trading and investing will have its ups and downs. I don't know many successful investors that change their styles depending on which way the wind is blowing. If I can make it through these types of periods with minimal damage and make hay when the sun is shining for my strategy than I should do well over time. That said, is it over yet?

1 comment:

Chaos! said...

I'm with you. I have a string of 18 profitable months in a row that's threatened this month (I haven't waved the white flag yet).
My sense is that our styles are similar in that we fade what time-proven indicators tell is rediculous.
I was going through the usual soul searching last week. I then put up the S&P shart from the end of August til now. My style struggles in prolonged one-way moves. I came away from it thrilled at the good profitability til this month.
I'll stick with my style. It's usually lights out good after stupid moves like this, but timing is everything.
It's going to be a phenominal trading year!