So this has been one of my worst years trading without doubt. One comforting thought was that, as jinx may have its way, I’ve picked one of the worst year to embark on full time trading.
These days I follow The Fly on ibankcoin.com to gain candid perspectives of a professional money manager and entrepreneur. So much so I am afraid I’ve already grown accustomed to his frequent foul language.
When I started following him back in August, his managed portfolio was up around 14% (btw, don’t quote me on any numbers, all from memory and all ball park numbers) for the year. Then came September when the August low was broken. He had to take proactive losses in order to protect his year-to-date gains of about 7%.
Then October rally came and not only did he jump right back in but with a vengence – very gutsy at the time. Man, he could have hated himself for selling at the low (and slightly short I might add) and could have missed the biggest monthly rally ever. That didn’t happen. He kept his head cool despite doubling the use of his foul language. At the height of October, his account was more than recovered, up a record 17% for the year.
However, may be the greed took over a bit. Despite the European woes, he was banking on the Thanksgiving rally and stayed very long (granted, 40% was in gold and silver stocks) with only 10% cash on the side line. Technically, the bullish stance was even appropriate given the symmetric triangle continuation pattern. Market being what it should be, it broke all jaws and broke instead to the downside, making the Thanksgiving week sell-off the worst since The Great Depression! That wiped out ALL of his year-to-date gains, going all the way back to 0%.
Once again, he did not quit and held on to his positions. “It’s one thing to buy high. It’s entirely unacceptable to sell too low.” On Monday’s 3% pop, he didn’t sell but vowed to get his record return back. Today the market popped another 3.5%. Good for him!
Why not follow his trades?! Of course I did, but I either picked his losers (e.g. RENN, LULU) or got his bad timing and did not follow through. Sounds familiar? Hello jinx!
But the point is that during the last 4 short months, even a professional money manager went from +14%, to +7%, to +17%, to 0%, and to now +11% for the year. Tumultuous!
This brings up another topic: bankrolling. If a pro does 17% for the year, that would be a splendid year. What if I had the same stellar performance, the best case scenario? My $130K account would have a gain of $22K. Is that enough to earn a living?! Oh yes, but on the poverty line! Unless I have a million dollar account, or I day-trade like a jack hammer, I don’t stand a chance. That got me thinking. Why wouldn’t it?! Guess what, you, too!
Speaking of the subject of bankrolling, there was another blog from ibankcoin.com by chessNwine that was rare and relevant. In short, I need to have at least 6-9 months of money standing by in case of a bad losing streak or difficult market when one should not trade and therefore no income. If I feel I have to trade to pay my bills, I will probably blow my account.
Still over 2 hours to go before the bell, but below is a snap shot of the SPY daily. I missed the 50 day EMA add for my short position due to the huge gap up this morning. That’s a rare break, assuming we’re still in a bear market. I added 600 shares of SPXU this morning averaging 14.42 — too early as it’s went all the way down to 14 since I bought. I need to remember not to repeat the goosing back in October. Sitting on my hands and typing away, this would be my third post today.
Portfolio Value: $129,800
Market rallied another 50% during the last hour and closed up 4.2% for the day. Holy smoke! SPXU down 12.66% and TZA down 17.75%. Should I cry uncle?
Portfolio Value: $129,000