Went To 100% Cash

My stated goal when I bought my first two positions at the beginning of the year was to be very cautious and see what happens. MRZ.V did extremely well and shot right out of the gate. MXI.V on the other hand started dropping like a stone after I bought and kept falling and falling. I reduced my MXI.V position at a critical juncture but failed to admit the trade simply was not working. Instead of completely closing out the trade I held on to the remaining position. Big mistake. It cost me lots of mental energy and ultimately lead to loss of focus. It’s what I would label as a situation where my judgement got clouded. Put another way, bad trades, and especially staying in bad trades, has a hugely negative impact on future trades. As Marty Zweig says: It’s ok to be wrong. It’s unforgiving to stay wrong.

MRZ.V’s gains were much greater than MXI.V’s losses. So I kept increasing my market exposure and initiated several additional positions. My portfolio was going up but not in a meaningful way. I was basically starting to push it although the percentage performance of my portfolio was telling me I was not in a flow state of mind. Then YUII gapped down and my stop loss didn’t provide the kind of protection I had hoped for as price gapped down below my stop loss. That’s part of trading and that’s ok. MRZ.V one of my biggest positions then started to tank as well and within two days I was back where I started 10 weeks ago. I lost around 1% of my overall portfolio. No big deal. Basically nothing happened.

Not true. I lost mental capital and wasn’t disciplined when it came to cutting losses early. My job as a trader is to learn from my mistakes. If there is something I have learned in all those years it is the following: I am the only one responsible for my performance. I am the one who enters positions, I am the one who exits them. I assume full responsibility for the outcome of my trades. I make no excuses. Instead I analyze my mistakes and do my very best to not repeat them over and over again.

I will need a few days to clear my mind – then I will repeat the process. Initiating new positions. Closely monitoring if I am in sync with the markets. Pushing it when the markets prove me right. Drastically reducing exposure when trades do not go my way. What I will pay much more attention to going forward is to cut losses early. Before I enter a trade I will better define the price levels where I consider the reasons for my entry not to be valid anymore. That’s where I will exit the position. Enough said.

You might want to reread the excerpt from Justin Mamis: ‘When to sell’ I posted a while back. He addresses the same subject and he is a much better writer.

Time to turn the page and move on. Remember: There’s never a shortage of opportunities in the markets.

Have a great weekend!