That's what traders call it when they are losing money and their account is going down... I'm down 15.9% on my trading capital so far this month or a loss of $4292 so far. That's $476 down per trading day on average. The model is down 2.86% so far this month and when the model is doing poorly I tend to do terribly. Actuallly when I fit a trendline to a chart of my returns on the Y axis and the model's returns on the X axis I am still above the trendline for this month (technically I have a positive residual this month in this regression - alpha is very negative and beta of my returns vs. the model is near 3).
I don't seem to be able to do anything right tradingwise at the moment. I missed the big downswing yesterday because I was too busy and the model was long. Today the model is short and I'm trading and the market is going up! Supposedly, according to the media, the market is rising because the PPI figures released this morning showed inflation was under control. Therefore, may the Fed will cut interest rates sooner rather than later. Initially both bonds and stocks rose. But then bonds began to fall all day long and ended up down. This means of course that the yield on bonds rose. So if bond yields are rising how can stocks be rising on hope of a Fed rate cut? So I lost on both fundamentals and technicals today.
I need to stop the bleeding to avoid blowing up all my trading profits all over again. I'm going to have to change my strategy a bit I think. One problem that is getting me stuck in losing positions is mixing up different time frames. I am thinking of putting different trades in different accounts. In one account I will do trades purely according to what the model says to do. Then in the other account I will do discretionary trades - mostly these trades will be in the same direction as the model - for example, my overnight trades. I could get in or out of those trades without worrying whether I should hold the position because the model might turn out to be right, as I'll have another model driven position anyway. This might be easier to manage mentally. We will see.
4 comments:
It's a tough market out there right now -- I can't believe the swings. I'm pretty much sidelined right now and also holding a considerable amount of cash from selling into the recent run up. Yes, I missed *some* of the big upswing from the Feb low, but I can't see how this thing is going much higher before we see it head lower. I did pick up some defensive longs on the feb dip, and they're doing well, but I am resisting the urge to put on any out-right trades. The risk is just too high in this market.
Thanks for your sympathy/empathy! :) We might get some pullback Monday morning after finishing on the highs of the day. But after that the model sees next week going on and the overbought rally intact...
Should have been "going up" not "going on"... but, maybe that too.
mOOm,
It's a tough market now, very choppy. Good luck in turning around the losses.
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