The way the universe works is that most of the time things are in a state of equilibrium.
Most of the year I was chopping up and down around a certain amount of cash. Up some days, Down some days. Mostly just a grind financially and emotionally.
However, in August seemingly out of the blue, things changed. The market cracked and I was positioned for it.
The rapid influx of money into my account was unbelievable. All of a sudden I had vindication for being Bearish all this time. My thesis was proven correct and I thought the market breaking surely had to be the big event I should’ve been waiting for all this time. I correctly backed off my shorts at the bottom but unfortunately ended up hopping back in short too soon. What followed the August crash was a series of intense and violent whipsaws that proceeded to grind down half of the gains of the swoon… That was a tough period for me but I managed to get through it pretty well with the bulk of my capital and confidence in tact. The short-squeezes did hurt though. Because the crash happened seemingly out-of-the-blue I decided it was prudent to always have a short line on in case another catastrophic event occurred overnight. It did not. What did occur was just as it has been for years. Every time it looked promising for Bears to get some continuation, the Plunge Protection Team would step in and ramp the futures 100pts in the middle of the night creating a long running short-squeeze the next day..
Fast forward to November, squeezed hard I knew the rally had gone on ridiculously long. The Bulls had miraculously managed to grind us all the way back up to the scene of the crime where the breakdown occurred. The market started showing signs of rolling over and I began betting big. Seemingly it cracked, stocks and oil fell for an entire week and I had once again made huge profits on large short positions. Once again my confidence was through the roof but this time, my vision was clouded and I made a grave error. I reduced my diversification and put on large, concentrated short bets in equities and oil. Both markets would proceed to whipsaw and completely reverse, engulfing the entire prior weeks price range.I should’ve been fine except my sizing was too large and I lost the money twice as fast on the reversal. Next thing you know I am right back to where I started with around the same amount of money that I had before the August crash... I did do one thing right. When my account was above the level I have deemed significant, I took out a little bit of money and locked it in as cash in a different account.
Anyways, same levels as before, same capital as before. I guess you can’t be too surprised to have a flat account when the markets traded flat for a year. But I had that money in my grasp several times and I wish that I had played it better to hold on to those gains. It’s a lesson in greed, position sizing, keeping a clear, focused, and disciplined mind. If you lose your discipline, you will lose your capital.
It reached the point where I stopped myself, changed my strategy. I am focusing on defensive measures now. I no longer am playing with that intra-day hedging strategy I was attempting before. It ended up being my downfall as thinking I was safe with a hedge, I would end up taking on too much risk, take out the hedge at the worst time for a loss and then end up getting whipsawed into a loss on my core short position also. You simply cannot complicate this game needlessly. The market is complicated enough as is! A simple, basic strategy that you can stick to will always ultimately prevail in the end.
Now I am positioned how I want to be positioned, but with small position sizes. I am playing for a long-term macro move. I am playing for my thesis. Looking at the YTD performance of all these asset classes my thesis is certainly playing out. It is just taking a much much longer time than I ever anticipated.. Moving forward I will respect risk and size my positions with an amount of leverage I can withstand. The market never stops moving. Trading this market is a marathon. I would like to swing it, catch these long term trends but I must persevere the highs and lows of the interim. I just have to realize that attempting to get rich quick in this business is a recipe for disaster that opens up a myriad of other issues. There are some things that I could change. Some outside influences I could remove. I need a healthy, disciplined, and focused body and mind if I am to make it as a trader. The only way I get there is to start making some changes in my approach and technique.