The market is pulling back right now. Aside from a couple of sectors, just about everyone who owns major stocks right now is seeing red.
Where will this pullback lead? Last time there was a big pullback, which was about a month ago, all our positions went from deep in the red to profit. Will that happen this time? There's no way to know for sure, and it's certainly possible the market will pullback further and these will all indeed finalize into losses. It looks like we took two losses this morning (BILI and SKLZ) as of the time I'm writing this.
This is the risk I've chosen to take by making these trades, and it's normal to go through cycles like this. My portfolio is at about a 14% drawdown (unrealized). This is noticeable, but I've also seen it before. And I fully expect there to be bigger drawdowns in the future giving my position sizing strategy.
Interestingly, the times in back tests where the most profits were made is when the market was in a pullback. That's when "reinforcement" positions get set up and and profits get amplified get made. That means that sometimes historically, losses preceded big gains. That said, pullbacks are also the time where losses can increase, because if the pullback doesn't bounce back up, more losses come in. There's just no way to know for sure where the market will go from here, so I stick to my plan of taking trades that have an edge in back tests.
This is a great time for you to be evaluating how you're feeling and whether you truly are willing to keep trading. There will be many periods like this throughout the journey, and this might be a good test of whether you really want to be on this journey (and of whether you might want to alter your position sizing approach). I'm in this for the long haul, but as always you decide for yourself what you're going to do.
If you have any questions or feedback, I'd love to hear from you.