It's been a while since my last newsletter, I have had some emails from people wondering if I had dropped off the face of the earth, (or gone on a meditation retreat) but no, I am still an earthling and my navel is still in the same place it’s always been.
Trading can be a simple game technically but certainly difficult emotionally. Ones personal life impacts a trader/investors decisions and therefore performance. A recent personal example was the suicide of one of my closest friends, who by the way never traded a share in his life. During this time of consoling grieving wives and children, writing eulogies and dealing with my own humanness, trading took a back seat. Errors creep in, ambivalence takes over, until “one gets back on the horse” as a country police sergeant once said to me, referring to driving again after one has experienced a very emotionally challenging car accident. There would be those types that argue emotion is not a factor, just put the rational hat on. I would counter and say that under severe emotional stress, cognitive function becomes debilitated to some degree, depending on the person.
So that’s been the reason for my retreat from writing newsletters and lecturing. Thank you to all those that emailed me to enquire as to my well being, it is much appreciated.
How are you coping with the Greek and China drama, and the emotion connected to it? Market volatility is directly connected to human emotions, fear creates action, not always rational. Also, as trading is a combination of theory and practice, how are the systems coping? Well, it depends.
Slower exits have performed well, not so the faster exits in this now volatile (it took a while to come) market.
The system on the website that uses the exit of two EMA moving averages 7 and 12 has performed well, but nothing is perfect, it has given back some profit as the market fell. But then it didn’t sell you out when the market dipped and rebounded, as has been the case a number of times recently. The weekly longer term exits have been the best and some may find it surprising that the monthly systems have been even better. Below is a chart of the weekly system discussed in the educational sections of the website, (not my portfolio) as you can see it's given back some profit from its high, the dark green on the lower section of the graph representing cash. The system cashed up as emotions and uncertainty heightened around Greece and China.
Objective, Focus, Discipline and Patience
The big 4 in trading, arguably your life as well. It's been a great time for some traders and most frustrating for others. I get emails from past course attendees and private clients discussing results. As I said those using a slower exit have done well, those that chose a shorter exit have been whipped in and out, not catching any big trades. If you have been diligently applying a strategy to the market without success, now is the time to re examine the objective, review your focus and discipline with your trading and attempt to make the neccessary changes. As Einstein famously said, the definition of insanity is to continue doing the same thing expecting a different result. Also don't be too hard on yourself as there is a luck factor in this game. We were not to know a year ago long term exits would do well, next year it could be the opposite. No matter how hard we work at improvement patience for success is required.
As always my personal trading performance is up for public scrutiny. The profit is 22% (as of writing) since March 2014, a little below testing results. This is due to what I mentioned above, as well as the unlucky decision to implement some system changes just before my friends departure, the result being some errors. You can check out the portfolio by clicking on the link below.
I will sign off by recommending you look at this excellent Ted talk about addiction. Many years ago the American trading coach Alexander Elder advised his clients to sit in on a AA meeting, in an attempt to determine if they had an unhealthy relationship with the market, if their trading was in fact an addiction. I took his advice and it was an enlightening experience. I am passing on the lesson, watch this video and have a think about your trading discipline.