Trading Update: 27 December 2014

True Profits Earned in 2014 to date: US$39,384.88
Current drawdown from maximum true profit earned in 2014: US$325.96 
Change from last week: US$1,344.91
Directional stance: Portfolio is 57.38% bullish.

The year-end is near. It's been a short week with markets closed for the Christmas holidays. The markets are continuing to hit new highs but without the ferocity of the rally we witnessed last week. Truly a Santa rally. The rally appears to be winding down in anticipation of the next pullback. I did some old-school phone trading again to rejig the portfolio, given the rally earlier this week. So now, the portfolio is primed to make more should the rally wish to continue. Should the pullback come, then it's hold-on-to-your seats time until the rally resumes again. There are 2.5 trading days left in the calendar. All I want now is for the portfolio to cross the target threshold I have set for this year. Then all would be well! I expect to update again sometime in the first days of January 2015 to do a major yearly update.

Trading Update: 20 December 2014

True Profits Earned in 2014 to date: US$38,039.97
Current drawdown from maximum true profit earned in 2014: US$1319.10 
Change from last week: US$1,030.71
Directional stance: Portfolio is 55.56% bullish.

It's been a good week on paper, and most importantly besides locking in some modest gains, the portfolio is finally (at long last, way way overdue, you get the point) aligned with the intermediate trend, which is 2100+ to 2500+ as the next top for S&P 500.

The pullback that I was waiting for certainly did not renege on its promises. It came with a flourish and the markets dived fiercely for a few trading days, hitting sub-2000 lows. It was certainly no wimpy pullback. However, the markets bounced off from the bottom with such a ferocity that by the time we had to concede that the pullback had ended for good (i.e. no more "one more leg down" to squeeze more short profits out of the pullback), quite a good bit of the profits I had gotten from being short during the pullback had been eroded. I did however make some gains from the move up after switching to a bullish stance, hence the drawdown amount is looking pretty docile this week.

On hindsight, I should have booked my profits much earlier on in the week, but as Gordon Gekko said in Wall Street: "Greed is good." I guess not, this time! I'm motivated by greed (to extend profits) until fear (of losing money) overrides the greed (actually like 99.69% of us probably are).

Speaking of Gordon Gekko and trading in the 80s.. interestingly enough the specific counter I trade requires my trades to be placed by phone for some reason. Yup, even in 20152014. Even if my broker claims to offer its clients a state-of-the-art trading platform, with colourful charts, the ability to place complicated trade orders, cutting edge news updates, etc. but at the end of the day yes I have to call in to talk to fumbly traders and scream the names of countries like "SELL 999 UNITS OF ARGENTINA BRAZIL CHINA LIKE NOW!!!!" and wait and prance around my room holding my phone as they take their own sweet time to place the trade while the markets move against me. Really old-school but it makes me feel like one of Gordon Gekko's disciples in the "good old days".

All this talk about Gordon Gekko makes me want to re-watch my favourite trading movie, which very aptly is set during Christmas in the good old 80s - Trading Places! For everyone reading this, please have a good Christmas! and I will see you again next week.

Trading Update: 13 December 2014

True Profits Earned in 2014 to date: US$37,009.26
Current drawdown from maximum true profit earned in 2014: US$0 
Change from last week: US$7,477.30
Directional stance: Portfolio is 54.69% bearish.

What a difference a week makes. The US financials continued to rally on Monday and the drawdown hit a high of US$8k+ before the long awaited pullback arrived. Thanks to the dip last night and the large move down on Wednesday, the drawdown has been wiped out and a new high for the portfolio was achieved.

Do I deserve a pat on the back for this? No, one reason being that my portfolio is still bearish-leaning and would need the pullback to continue in order to make money. The thing is that the expected pullback has met its minimum size requirements and a bottom could occur anytime. I would not want to sit through what should be a fierce rally with a 55% bearish stance and will need to find a chance to rebalance the portfolio to a bullish stance during the next market hours. This is because the current indications are that the next move for the S&P 500 (after it bottoms after this pullback is over) is likely to be a move to 2100+ at least, with potential to hit even 2500+. So the deed is done only when the profits are booked by resetting the portfolio to a bullish stance in anticipation of the rally. I would have loved to have booked the profits last night but it doesn't make sense to wake up at 5am to close out positions so I'm hoping the futures on Monday do not throw up any upsets. There is also a bonus that the pullback would continue. That would be nice. Ah the tussle between greed and fear. It doesn't help that it's close to the year end and there are some targets I would like to hit for the portfolio for this year. And I am within smelling distance of those targets.

But even if I booked profits for this pullback leg, it has been bad trading on my part in the past few weeks. Why is it so? That's because the outlook of the markets had changed such that moves to 2100+ to 2500+ are likely. In light of this, continuing to maintain that bearish directional stance and waiting for the pullback to happen was trading against the trend. In my view, I should never trade against the mid-term trend (i.e. trend for next 6 to 1 year), especially for the trading strategy I am employing. Waiting for a move against the intermediate trend in order to make money can get hairy and takes out some of the emotional capital out of you. Make no mistake, it's bad trading on my part and I need to sort out the positioning of the portfolio before the rally begins. Making money this way is like picking pennies in front of a massive road roller nearby - one day you are going to get crushed by it. What I should have done as per my trading rules was to take the drawdown on the chest (when it was about the US$2k to US$3k range) and start over with a bullish tendency.

Regarding my bad trading point above, an analogy would be like in football - would you rather play badly and win, or would you rather play well and lose? In my case, assuming I book the profits, it would be like playing badly and winning. Scrappy play but somehow the opponent makes a mistake and gifts your striker the ball in the penalty area, your striker trips and his foot happens to touch the ball as he stumbles and falls on his butt and.. GOOOALLLL wtf! In football, it's all about the 3 points - but in trading, while it's all about the money, the methodology is sacred. Trade in the right way, and given an infinite amounts of trades, you are going to make money - even if you may at times lose money despite trading the right way. Learn to see yourself as a casino - once you have that 0.000x% edge, you are going to make money eventually, given an infinite number of trades. That's the gist of my favourite book on trading psychology - Mark Douglas' Trading In The Zone.

Trading Update: 6 December 2014

True Profits Earned in 2014 to date: US$29,531.96
Current drawdown from maximum true profit earned in 2014: US$6925.88
Change from last week: -US$4941.82
Directional stance: (Still) awaiting a pullback.

The bull market is relentless? But like a spring, the further it is stretched, the more violently it is going to coil back. Sell signals are starting to appear. Hopefully it will be a more fruitful year-end.