The second consecutive month with losses… As I mentioned in my previous blog post, these are difficult conditions for me. The market is always right: it is like a mantra which I have kept telling myself for years. You should never be so arrogant to think that you know or can predict in which direction the market is going to move. Never make this huge mistake if you can.
Based upon my own experience I can say that either I am wrong with my view of the market, or I am "too early". It is possible that this is a very “deep correction”, though. Nevertheless, I have to reconsider my view of events, especially after such long period of continuing loss. Most likely I have to reduce the number of transactions and have to look at the data with a new, “fresh look” which is very difficult to “erase” what you know and do to be able to get needed insight.
What’s positive – I still have a positive result of 14,25% since the beginning of the years. I think that not that many are able to show a positive result in these circumstances. Nor the negative result either. This is one of the problems in this industry. Many bloggers regularly show good results (as a rule, the annual results are positive and fluctuate ~30%) and do not like to talk about losses and the impact of their loss on their decisions. I post my real monthly trading results, showing my actual trading deals because this after all is a blog about trading and investing, blog about deals and tips as they are and my real life decisions. In a true sense "it is what it is".
But we all are humans, we all make mistakes. That’s what makes us better if we deal with them in a right way if we are able to learn from them. Loss greatly affects your mind. Sometimes some seemingly “smart” ideas pop up in your mind provoking the desire to raise risks, even the reality suggest the contrary, to reduce them. There is a time when you want “to get even” with the market, an urgent wish to regain what has been lost. Your mind tries to spot some movement, traction to be able to act upon it immediately. It is useless and completely wrong.
The best way is to stick to the system, to the tested values and strict risk management. Something that is understandable, something that makes sense. You don’t all of the sudden be more “creative” or “inventive” than usual. Don’t invent a new bike and stick to proven system that works for you. This is especially crucial in turbulent times like these.
It is best to reduce the number of transactions. The famous Pareto principle works nicely in trading as well. The majority of consequences come from rather small amount of causes. Less is more!
I suggest that you do what I plan to do – go through your trades and trade only in situations that you recognize as both attractive in terms of gain and comfortable with your knowledge and experience.
Always analyze your mistakes. Have a look at the results and honestly admit to yourself that you are responsible for the mistake. Don’t blame the FED, regulator, or some other mystical unforeseen force since you were the one who made that trade and nobody else.
In any case – we live in a very interesting time where really unprecedented things are happening, and nobody can tell how decisions that are made today will affect us all in the future. I see this as an opportunity, since some previously strong daily routines are changing, new ideas and routines are emerging, creating more opportunities to those who are keen to learn and act.
Stay tuned!
Agris