Hey Guys,
Well the market finally broke out of that channel it had been in. And it did so with force, hammering downward late yesterday and and into this morning. As I was typing my email yesterday the S&P 500 was at 4110 and today right now it's at 3915. That's a big drop!
The market drop dragged a lot of my positions down with it and created slate of losses for me. I took losses on AMGN (stock and options), ED, PARA, AXP, and NVS. And I have other positions that are down right now too.
This is one of those gut check moments for traders. This is a drawdown. We knew this would be a part of our journey if we were going to follow these trades for long enough. When we look at back tests, it's clear that drawdowns occur regularly. The long term potential of this trading strategy looks quite attractive, but it requires living through drawdowns.
Since we know there is no way to escape periods of drawdown, then it's a question of how we want to respond when drawdowns occur. For me, my preference would be to stay calm. I don't want my whole life to get tilted just because of what happened in the stock market on any given day.
The main way I help myself stay calm is to focus on the big picture. For one, the back test shows promising results over the long term, which suggests it's just a matter of sticking to the plan through thick and thin. But an even bigger picture than that is that my self worth is not tied to money, and that there is connection and love in my life that has nothing to do with money. Those things can't be taken away from me just by losing money.
Reminding myself of those things is like an anchor that holds me steady. It helps me realize that I'm ultimately safe. It goes beyond the stock market; I can call these things to mind when there is any form of turbulence in my life.
I'm not saying that you aren't taking a risk by making these trades. There is very real risk involved. But if you accept the risk involved and just want to find a way to live through the drawdowns with more peace, then looking at the big picture might help.
I bought a full serving of new positions today. I bought BX and EA in the main account, and I bought the options for those tickers in the extra options account. I bought ENB and T in the low-priced account.
If you have any questions or feedback, I'd love to hear from you.