Wednesday, September 12, 2007

Back To Square One

At least I can say I followed the model today more or less. But I still lost money. Looking back at the last 2 1/2 months I lost $3140 in July (in trading) and then gained $1028 in August. Then the first trading day of September I was down a couple of thousand. In the last week I clawed it back until I was down $160 or so for the week at the end of last week. But today and yesterday I gave a lot back and now am down $1133 for the month which takes me back to the end of July pretty much. I think I will now give trading a break until we arrive in Australia. Hopefully I learned something from all this meandering up and down in trading equity over this summer. On a positive note, this is my best trading year ever. You can see how bad the others were. Last year I made $5,958 in short term capital gains and futures profit and loss. This year I have made $11,628 so far or $13,447 using the method I use for my monthly reports.* In 2002-5 I lost money at trading. In previous years in Australia there were some years I made money and some I lost but none as good as this. The statistical analysis is still showing some significant edge despite my poor recent trading. So I'm determined to keep on going.

* Taxable capital gains includes Australian trades and all short-term gains on what I consider to be long-term investments (not including mutual fund distributions). This includes some "strategic trades" aimed at realizing tax losses. The monthly report method only includes my US accounts and measures account equity irrespective of realizing trades. It also includes trades in my Roth IRA and net interest on the accounts.


Anonymous said...

Looking at your amounts make me feel really tiny. :) I am going to take that as an inspiration to study trading in more detail in time to come.

Consider this an amateur question: I have been buying a too aggressively (for my temperament) over the last few weeks in buying a lot of ETFs. I am afraid I am sort of "timing the market" as they say with all this buying activity. Is there a potential pitfall I should watch out for?

I can already see that I am getting addicted to hitting the refresh button over and over again in the hopes that the price will fall down a few cents before I buy. Plus, my portfolio has now skewed a lot towards foreign ETFs than domestic.

Anonymous said...

Forgive the grammar in the earlier comment. Sometimes my fingers type faster than my brain thinks.

mOOm said...

hmmm there is nothing wrong with "timing the market" except most people get it wrong because either they have no idea what they are doing or even if they do they tend to be too aggressive given the tremendous uncertainty - e.g. they sell everything and go to cash or short and then stick with that position. If you're wrong not only do you lose money but pay taxes on selling everything (unless it is a tax deferred account etc.) ....

In your case you've decided to invest and any of those "buy and hold" guys would say that is fine and that mostly dollar cost averaging doesn't work. Now given stock prices are a little lower than they were it can't be the worst time to buy. It's not neccessarily the best either as if a recession is coming the market will go down further.

Both in long-term investing and trading you need a plan. Particularly for trading - you will lose money there without an "edge" which is why most people fail at "market timing". For investing I don't think you need to worry as much about allocation among assets as many suggest but I think real diversification is good.

So what is your plan and are you deviating from it?

Anonymous said...

Other than "buy and hold", I don't really have any other plan.

I first want to build a strong base relatively less risky investments - mostly ETFs. And then I want to employ a part of that towards some more sweating - for higher risks and returns. I guess I am still in the first phase of the plan - the square one. :)

I don't see any short term requirement for those funds - so, usage wise, I could probably say that the plan is to see some growth in wealth over a very long term. In that sense I guess I am OK.