Hey Guys,
The market had a doozy of a drop yesterday. The S&P 500 dropped 325 points in a single day. This morning it's up about 75 points from yesterday's close. The market had already been volatile over the last few months, but this took it to another level.
I had a number of positions get closed with losses since yesterday's email. Three different stock positions hit their stop losses (CVX, BP, and XOM). And I had three option positions that reached their time limits this morning and landed in the red, wiping out the gains I had from my wins earlier in the week in that account.
After a tough day in the market like that, I like to zoom out my focus and look at the big picture. I look at how this strategy has performed over the long term in backtests, and notice that along the way, there were plenty of periods with strings of losses and very tough days in the market. So as tough as yesterday was, it's not abnormal, and it's something that is expected to happen occasionally.
That's what's so challenging even if you're trading with an edge: living through the drawdowns. The emotions can get intense. If you felt an emotional overload over the last 24 hours, it might be a good opportunity to revisit your position sizing approach and make sure you're comfortable with it and able to live with the risk involved.
For me, my objective is to stick to the plan through thick and thin, just like the backtested approach. So I got right back to work today and took on new positions this morning. I bought shares of TD and BIIB in the stocks account. And I bought options for CSX and GD in the options account.
If you have any questions, just reply directly to this email.
Eric