Saturday, September 08, 2007

Weekly Trading Report and Goals

This isn't a regular feature of any sort, just an update on my trading one week into the month. The model is still short but I closed all short positions before the close today, worried about rumors of the Fed making a surprise interest rate cut on Monday morning based on the employment report that came out Friday morning that showed that employment in the US fell for the first time in four years. I doubt they will do this, but you never know what might happen. The 1998 scenario is still playing out perfectly just faster than things happened in that year. If we continue to follow the script there is only about a week to the second bottom of the market paralleling the second dip in October 1998. Unfortunately we are travelling to Australia on Thursday and Friday next week, so I am not sure how to play this. If we are still on the short side for Thursday I may keep my Ameritrade account in a hedged position (short enough SPY to hedge away market risk). This will reduce my overall portfolio beta from 0.5 to 0.4 or so and mitigate the effects of any severe drop in the market.

I ended the week down $167. I was down around $2000 on Tuesday after a stupid NQ trade. I posted that bear picture as I was feeling like a bear getting run over by bulls or maybe by a truck full of bulls. Again I was trading against the model. If I hadn't taken that trade I would be up $1100 on the week. If I'd taken the trade in the direction of the model...

My aim at the moment is very modest - earn $1500 a month from trading for the rest of the year. That would bring my total to $19000 or so which was my original goal for the year. It also means maintaining the same average pace for the rest of the year. My goal for next year - I know it is a bit early to be setting next year's goals - is to double this to $3,000 a month or $36,000 a year. That is only half way still to the real goal of making $75k per year from trading, replacing my previous salary. The $36k goal looks very doable if I reduce the number of very bad trades - all the majorly losing trades against the model for instance - and only slightly increase capital deployed. I'm also setting a goal of adding $100k in net worth next year. Here is a budget - in the same format as my monthly reports that shows how we achieve this:

I know it is silly to include everything down to the last cent but I can't be bothered to round this forecast from my projection spreadsheet.

Current other income is the sum of Snork Maiden's salary and tax payments. I will be paying taxes on investment and trading income and I've deducted these here. Half of the current investment income comes from trading and I'm expecting the Australian Dollar to rise to 87 cents by the end of 2008. The non-trading, non-forex rate of return implied is 10.5%, which does not seem unreasonable. We'll be earning $68k from salary and trading income after paying all taxes and spending $47k. Our savings rate from this active income is therefore 30%. I put this in for Enough Wealth :) Snork Maiden and her employer will be contributing $9000 a year to her superannuation fund. So, if everything goes to plan, it should be doable.

2 comments: said...

Sounds like a good plan, although it seems to be based on "best case" more than expected outcome ;)

I should really revise my own goals and budget for next year - we have been coasting on autopilot for the past couple of years and we could probably benefit from setting targets that are a bit more of a "stretch".

BTW - if you're ever visiting Sydney drop me an email if you'd like to get together. Snork maiden would probably get on well with DW (she's a MBC from Penang and worked for the ASX for ten years).

mOOm said...

Yes it is a "goal" not a "plan". But even with much worse results we'd still see an increase in net worth, which is reassuring. My projection spreadsheet has the USD 1 million goal reached in 2012 now, but I'm not going to take down the 2010 date yet :)

Thanks for the invitation!