Hey Guys,
The last 24 hours in the market have been atrocious. The market dropped 120 points yesterday and then dropped another 100 points overnight. In the process, a lot of my positions got clobbered.
I had three futures positions hit their stoplosses overnight. And my futures trades are weighted more heavily than my stock trades, so that was a big blow. In addition, stocks were gapping down all over the place. I hit the stoplosses on a bunch of stocks. I also took a big loss on the GLW option position and am generally down on options positions across the board. This is a bonafide drawdown.
Speaking for myself, I can say that as I watched the last 24 hours unfold, I had a couple jolts of frustration. I also felt some fear at times. But overall I'm ok and grounded. I've even had some spurts of excited energy wanting to celebrate life despite the market turmoil. Here is some perspective that helped me:
1) My intention is to follow this trading strategy for decades. With that being the case, it's all but certain I'm going to have to live through periods where the market is rough. It's not a case of, "I hope I can trade 20-30 years and never see a market downturn." I don't hope that. There's no precedent for that, so I don't expect it. So if I'm just about certain I'm going to live through periods of market turbulence like this, then why get all worked up when they come around. If we can learn to expect that there will be losses and drawdowns at times, then it makes them easier to endure. We don't have to try to control it; we can just let the market take its course.
2) If you look back at 20+ years of history, over the long term this trading approach suggests there might be a payoff to sticking to the plan. This page shows the breakdown by ticker. Those results include periods like the financial crisis of 2008, the pandemic outbreak, etc. You can imagine that for any of those tickers, there may have been an individual trade that turned out to be a big loss, and yet a single loss didn't define the overall performance. Seeing that page reminds me why I'm doing this and helps me keep my focus on the bigger picture.
3) Emotions are temporary. Nothing lasts forever. There have been many times in my life where something seemed catastrophic and I was feeling extreme fear or anger, and when I look back now, it turns out that none of those things actually doomed me. I'm still here. Our minds have a way of over-catastrophizing sometimes. If you look back at some of the times you thought you were doomed, check how things actually turned out in the long run. If you're reading this email then for the most part things may have actually turned out ok after all. Knowing that allows us to detach from the emotions to some extent, which makes it easier to live through the periods of drawdowns.
I did pick up a bunch of new positions today. I filled the shelves with trades in all accounts. In the main account, I bought stock for MCK and EXPE. In the extra options account, I took on positions for TMUS, EXPE, and PM. In the low-priced account I scooped up OMC and DAL.
Reminder: I have some options trades reaching their time limits today. I'll be closing those at the end of the trading day today.
If you have any questions or feedback, I'd love to hear from you.