I’ve been tracking my performance for some time now and have recently completed another full year cycle of recording statistics about my trading. I am sure by now most readers are aware that I have been having a bit of tough time in the market over the past 3 or so months, so I don’t need to elaborate on exactly how rough it’s been seeing as you already know.
None the less, I have spotted a few trends in my trading performance over the past year that I intend on either stamping out, or improving upon. I have been making use of a volatility and probability based strategy that allowed me to get some great runs out of stocks like Telkom, Capitec and PSG. During times of market turmoil however, my strategy suffers. What I can now see by making use of the historical data I have, is that during the times that the market is trending higher my strategy tends to outperform rather well. However, during times that the market is moving sideways or coming down, my strategy takes strain, and often in excess of the market.
The idea is for the strategy to accumulate good quality stocks during tough times, which works very well. Although I think it will work considerably better as a long term equity strategy and not as a short term derivative strategy. Granted that during the ‘trending up’ times the strategy works well.
Knowing this allows me to be able to switch between strategies during different types of market conditions. Therefore I intend to refine my strategy over the next few weeks in order to be more adaptable to different market conditions. I need to trade more conservatively when the market is moving sideways and I need to be more willing to short when the market is moving lower, and I need to stick to what has been working during times that the market moves higher. I know that switching between these different trading styles is within my ability, I just need to formalise a set of rules for me to follow when the appropriate times come, as well as a way of identifying the changing market conditions in order for me to be able to recognise when I need to switch between styles.
This gives me a lot of homework to do over the next few weeks. It may sound tedious and like hard work, but trading for a living is tedious and hard work. Therefore I am more than willing to put in the time refining and back-testing strategies every year. My goal is to constantly improve my trading and this is to me a logical way to take stock of where I am and what I need to do in order to improve.
The most valuable lesson I have learned over the last few months is that trading is about survival. Yes, sticking to your rules is of the utmost importance and is the only way in which you can ensure that you are protecting your capital when times are tough, but every now and then we need to re-evaluate our rules to make sure they are still relevant. The market is always evolving and we must evolve with it if we hope to survive.
Some homework for you as well; go and look at each of your trades over the last year and try figure out how you could have done better, regardless of the outcome that trade had. It may make you feel a little stupid every now and then (as it surely does to me), but I assure that you will spot some sort of pattern of mistakes that you make and that fixing those mistakes is easier than you think.
@TraderPetri
22 July 2015
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