Stepping Aside – Going To 100 Percent Cash

by Olivier on October 28, 2009

I sold all my positions and went to cash today. On the one hand this was a very tough decision. Today’s email went out to roughly 1.000 people. At times this can add some additional pressure. On the other hand it was an easy decision as running a website really helps being disciplined as it is very much like keeping a trading journal.

By the way I did my best to write about my plans beforehand. Today’s move shouldn’t come as a surprise. Here are a few reasons why I decided to sell all my positions:

  • Technical Damage: Technical damage is huge. In a nutshell it means Overhead Resistance has increased drastically for lots of stocks. They will have to fight their way through this overhead resistance if they want to make new highs. Having to fight through overhead resistance is the number one performance killer. DGW – Douyuan Global Water and CAST – China Cast Education are two examples for extraordinary technical damage on my Public List.
  • Flow: I didn’t experience ‘flow’ anymore. The last two weeks I have been fighting the tape and I have not been in a flow state of mind (I still haven’t written a posting about that subject yet. For those interested go to my book section. I recommend reading: ‘Finding Flow’). Most often these are the first signs of a trend change.
  • Control: One or two more down days and I was risking to reach a point where I would lose ‘control’. At some point in time when losses become too big you become passive and our mind shifts towards a ‘hope’ state of mind. Whenever that happens you are dead.
  • Discipline: I obviously wasn’t disciplined enough with a few positions and should have exited earlier. Hindsight is always 20/20. Trying to stay with a trend as long as you possibly can means you won’t get out at the top. That’s the price you pay for riding huge winners like VEN.TO – Ventana Gold and BXI.V – Bio Extraction. I was down 20% from the top of my own capital curve. That was the signal to cut my losses and be disciplined no matter what. I could have opted for staying in and hoping for a reversal but whenever that happens this can be extremely dangerous to your financial health.
  • No bounce: It is still too early to tell if my decision was a smart one or not. QUC.V – Quest Uranium was the one I would have expected to bounce today. Everything was telling me it would. It didn’t. This is a huge red flag. Market participants are not willing to take on as much risk as opposed to a few months ago. This is clearly a sign to be more cautious going forward.
  • Mental Capital: Keep in mind mental capital is much more important than financial capital. You can always make back losses in the market. Once your mental capital gets crushed you are out of the game and it can take much longer to recover that kind of loss. That said, the recent down move was starting to seriously drain mental capital. As I stated in my newsletter today there is no way I am going to let this happen.
  • Market / stocks not acting as expected: One example for one element in the markets not meeting my expectations today was VEN.TO – Ventana Gold. They came out with stellar drill results. But today was the first time the stock went down after good results were announced. I still think this is one of the best gold mining stocks around. But this is a warning sign. As I like to say: This is a red flag. It doesn’t mean the stock will crash but it was an additional hint to be more cautious going forward.

So far, this has been a great year and I hope following what I do was profitable and an interesting learning experience. There are now almost 1.000 subscribers to my newsletter and website traffic is constantly increasing. My thanks go out to all of you for your continued support! I will take some time off and then we do it again 😉

I will try my best to update my website and especially my public list on a regular basis.

There’s never a shortage of opportunities in the markets!

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