Trading Update: 31 January 2015

True Profits Earned in 2015 to date: -US$17,260.48
All-time maximum profit earned since 2011: US$135,976.98
Current drawdown from all-time maximum true profit earned: US$20,536.58
Change from last update: Down US$12,672.32
Directional stance: Portfolio is 66.33% bullish

Holy moly! What a dreadful week. Look at those red figures!

Markets: Last week, I mentioned that there was a good chance the S&P 500 has bottomed, and an outside chance that we will hit the low 1900s before bottoming up for the next move up.

You can see what happened by looking at the new weekly candlestick chart of the S&P 500 I have put up on the sidebar. A big fat red candle formed this week taking the S&P to a low of 1989 for the week, and closing at 1994 for the week. The S&P 500 keeps getting drawn to the 1990s pivot like a magnet. Pivots can usually be strong support but if tested too many times they become likelier to give way and if they do, it means there is plenty of room to move down. Certainly, we are currently only 5 points away from seeing fresh short-term lows. The odds that we are going lower have increased so we need to brace ourselves for a rough ride down before we see sunshine.

Portfolio: What I said last week holds: If we see a further correction down to the low 1900s, that would mean for short term pain for the next two weeks or so before we see "green shoots" in the portfolio. 

Currently it's red, red wine. Like SMOL pointed out, CNY is coming and red is appropriate ;) And during CNY last year, I was experiencing a drawdown of a similar quantum. History rhyming again?

Flu: The worst of the flu is thankfully over, but I am just left with some lingering mucus in the nose from time to time, and a propensity to cough when speaking from time to time. A friend said he could "smell my flu" last night (to clarify, we were only speaking across a table and doing nothing else). Erm, ok. The flu is certainly taking its own sweet time to get out of my life but I will give it the time it wants. Maybe my body is trying to time my full recovery with that of the markets?

Primed for new highs?

Weight: Seeing that it's been a bad time in the markets, I have decided to look at another kind of chart. What's that? Certainly looks more bullish than the S&P 500 currently. But that's actually a chart showing my weight for the past year. Despite my best efforts to trim down on the fats, my weight seems to have "bottomed" (lol) and rebounded to near the "previous highs". While I can choose to blame the latest upswing on the stupid flu, whatever, it's time to shake it off!

Brokers: A friend highlighted to me that I have excess concentration risk in a single broker. Duly noted given that the portfolio size has grown and a broker wipeout would set me back many years in savings. As I use CFD brokers (currently City Index), I am going to give the big boys in the Singapore CFD space (i.e. Oanda, CMC, IG Markets, Saxo and if I'm really desperate, Philip because their really antiquated platform haunts me till today) a call to see if they permit shorting of the leveraged ETFs that I use. If so, I am going to park future funds in each new broker I can find until I have an even distribution amongst all of the brokers. If anyone has any experiences on Singapore CFD brokers to share, please let me know!

Romney: I'm a fan of Mitt Romney because the man speaks so smooth like a seasoned used car salesman and gets things done. Isn't that all you need to succeed in life? While he came from a comfortable background, he took his wealth to greater levels in his days at Bain Capital. Unlike other politicians in the picture today, some of whom were previous law lecturers without executive experience, Romney was a guvnor and had to organise the Winter Olympics 2012 under difficult circumstances (as it was held shortly after the September 11 attacks on World Trade Centre). A self-made man and a hero for me.

Best man never to make President?

So it's sad when I read that Romney has announced that he will not be running for President in 2016. In my book, one of the greatest men never to have taken the highest office. I suspect at the back of his mind though, a third failed campaign might have broken some part of him. I would have thought that part of the reason why he decided not to run was because after meeting Jeb Bush last week, he thought that Jeb, the other front-runner at the time, could get the job done, but it doesn't help that people have pointed out that Romney has in his statement announcing that he is not running, made some jabs at Jeb. Some say Romney is going to align himself with Chris Christie (another ex-lawyer!).

Why Lawyers Can Be Fuckers

Given the preponderance of lawyer jokes over that of any other profession, one is inevitably invited to consider if the premise that lawyers are somehow a little less moralistic than the average person holds.

My premise would suggest that the folks who have decided, or settled, on the practice of the law do not have any inherent inclination towards evil. 

The lawyers you see today, were once wide-eyed impressionable folks, like the rest of us, before they stepped into the institution known as law school. 

Once they went to law school, they came to be acquainted with the construct of the reasonable man.

Ah this reasonable man. It seemed, to the law student, that society is tailored to give the reasonable man the utmost of respect.

Why so? For, whatever the reasonable man said could be done, the law was crafted to allow as such.

So, the reasonable man assumes greater and greater importance to these wide-eyed impressionable law students.

Such that, the reasonable man grows to assume its mantle as a guide to the standard of behaviour by which folks acquainted with the law aspire to. 

Friends of the reasonable man

This is despite the fact that a reasonable man says that he need not save a drowning baby because he did not cause the baby to be drowning in the first place.

That reasonable man may also whisper in your ear to tell you that it is reasonable to omit to give someone material information as long as it can be established that the omission does not cause harm.

Unfortunately, many fail to see that laws are tools created by humans to regulate social behaviour.

As it is impractical and highly utopian to even attempt to socialise human behaviour to regulate humans into becoming angels overnight, as a compromise of sorts, laws are used more as tools to discourage behaviour that is unwanted, i.e. intrinsically offensive or harmful to others.

Thus, law is employed to work on a "lowest common denominator" basis, as a tool to weed out the lowest forms of behaviour that cannot be tolerated by society.

But what happens when people adopt the conduct of a reasonable man as their moral compass?

Is it right to say that as long as certain behaviour is not unreasonable and not criminal, that it's fine?

That seems to be the moral basis by which certain people in this world have decided to live their lives by. And definitely more so for people who think they have been educated in what is legal and what is reasonable.

To friends, families, and anyone important in our lives, does it suffice if we are merely reasonable towards them?

Or should we owe them a fiduciary duty of the utmost good faith?

Is it good enough, if we tell ourselves that everyday, we just have to be "reasonable" and not commit crimes?

When a lawyer omits to tell his friend something he knows his friend would like to know, he knows he has failed to act in his friend's utmost good faith. But can he still say he at least acted reasonably, because even if he did not disclose that information, he knows that his friend would not have relied much on it?

The lawyer would reason that his behaviour is "not unreasonable", and it is definitely not criminal.

But if you asked me, it reeks of reprehensibleness.

I ran this argument by Mrs RetailTrader, who is a lawyer by trade.

She smiled and would only say that my premise is "not unreasonable".

Trading Update: 24 January 2015

True Profits Earned in 2015 to date: -US$4,588.16
All-time maximum profit earned since 2011: US$135,976.98
Current drawdown from all-time maximum true profit earned: US$7,864.26
Change from last update: Up US$7,753.64
Directional stance: Portfolio is 63.51% bullish

Again, let's recap what I said last week, and what has happened since this week:

Last week

The breather that the S&P 500 is taking is proving to be longer and deeper. The S&P 500 took that frolic and detour into the 1990s and decided to linger a while more, and even toyed with the 1980s. That frolic and detour has caused the portfolio, which was positioned very bullishly at 60+%, to suffer a larger drawdown. The maximum drawdown experienced this week was at the close of markets on Thursday, at US$22.5k.

However ironically the technicals do not seem to warrant that bearish scenario that I highlighted (i.e. a downtrend that could head to under 1800). That scenario is currently off the table and so it is just a matter of seeing where and when this little frolic of S&P500 wants to end. It is very possible that the frolic ended on Thursday at 1988, or it could go on down to about 1950, so we shall see. It's a bit like getting the flu (I've got one since 2015 began (does my health mirror the markets or what?), but I've had no other symptoms since Day 3 of my flu, save for a lingering cough that refuses to go away for good. That's a bit like downlegs in a bull market - they end when they want to end, you just have to wait it out and let them run their course. So downlegs in a bull market = the flu.

This week

Markets: There is a good chance the S&P 500 has bottomed at the 1980s, and we are in the next bull leg that will take us to 2200+. There is an outside chance that the move from the 1980s to 2060s was a dead cat bounce within a larger correction, and the S&P will hit the low 1900s before bottoming for the move up to 2200+. 

Portfolio: The numbers for the portfolio are looking better this week as the S&P 500 bounced to the 2060s before taking a breather last night. From the portfolio's perspective, the leg bull leg up should put the portfolio into the green. At 60+% bullishness, the portfolio is primed to profit from a bull leg. If we see a further correction down to the low 1900s, that would mean for short term pain for the next two weeks or so before we see "green shoots" in the portfolio. 

Nobody likes to be in the red in your first month of trading but I'm still looking to have good year here. I just hope that the saying "As goes January, so goes the year" does not come back to haunt me. As things stand, if the portfolio's performance in January is repeated throughout the year I will be seeing annualised losses of over 16%. Let's see haha.

Off-topic (Health Matters): And finally I reserve a little luxury of space to bitch about life outside the trading world. As I mentioned last week, I've been sick since the new year and was coming close to finally declaring a victory over the flu late since last week until it decided sometime this week to relapse, causing me to hit new lows (like the S&P500) flu-wise. My nose ran and ran like the Ganges River, and well it looks like there are other bloggers I follow who have been sick since the start of this year as well (misery loves company!). I actually had to see the doctor on back-to-back days because my symptoms morphed like Mystique (on certain days the nose decided to take centrestage and on certain days the cough went crazy on me). Finally after I acquired VIP status in the clinic, the doctor got exasperated and told me: "Your flu is taking too long to recover. Now I am going to treat it very, very aggressively." That was music to my ears and I have been the super drowsy meds he prescribed me as I have been sleeping like a baby the past few nights. Now the nose is much drier and my cough reduced, and hopefully like the S&P 500 I can make a rebound to new highs (health-wise) this year. 

Sick.. of being sick

Truly a reminder that without health, you cannot enjoy anything, even if you have lots of money. Before we are forced to spend money to recover our health, why not focus our efforts on maintaining our health in the first place? Health is something that, when you have it, you tend to take it for granted, but it's only when you lose it that you realise how important it is. You ain't know what you got till it's gone. When we fall sick, our bodies are trying to send us a message and we really can't do worse than to heed it and give our bodies the tender loving attention that they demand.

Trading Update: 17 January 2015

True Profits Earned in 2015 to date: -US$12,341.84
All-time maximum profit earned: US$135,976.98
Current drawdown from all-time maximum true profit earned: US$15,617.94
Change from last update: -US$8,582.76
Directional stance: Portfolio is 64.22% bullish.

Quite a week this week. Let's see where we are from where we left off last week, when I said:

Yeesh the numbers are not looking good this week. That's some fierce red numbers staring out at me, and the maximum drawdown I hit intra-week actually exceeded US$14k. I did mention in the previous update that: 

In the more immediate timeframe the markets seem to be taking a breather and we can expect the S&P 500 to resume the rally from hereon, or more probably after more of a pullback has taken place (somewhere in the low 2000s). So we can expect some more short term pain for the portfolio before we get back into business.

So that's exactly the story of the past week, just that the S&P 500 did slightly more than what I expected and decided to take a frolic and detour into the 1990s. 

Although the S&P 500 has since recovered to 2044, the manner of its climb up back to 2044 indicates a worrying possibility that the S&P 500 has, for the intermediate term, topped at 2094, and a downtrend that could head to under 1800 has begun. This has to be monitored carefully seeing that my portfolio is still very bullishly geared. A heavy fall in the markets (which confirms that an intermediate downtrend is in place) and a bullishly tilted portfolio would not make the best of friends. The short term pain I spoke about previously could turn out to be something more and set back profit gains for some time. Caution is called for! Hopefully the market's movements on Monday can reveal more. I am ready to exit and rejig the stance of the portfolio if the market gives signs that call for it.

So, what has happened since? The breather that the S&P 500 is taking is proving to be longer and deeper. The S&P 500 took that frolic and detour into the 1990s and decided to linger a while more, and even toyed with the 1980s. That frolic and detour has caused the portfolio, which was positioned very bullishly at 60+%, to suffer a larger drawdown. The maximum drawdown experienced this week was at the close of markets on Thursday, at US$22.5k.

However ironically the technicals do not seem to warrant that bearish scenario that I highlighted (i.e. a downtrend that could head to under 1800). That scenario is currently off the table and so it is just a matter of seeing where and when this little frolic of S&P500 wants to end. It is very possible that the frolic ended on Thursday at 1988, or it could go on down to about 1950, so we shall see. It's a bit like getting the flu (I've got one since 2015 began (does my health mirror the markets or what?), but I've had no other symptoms since Day 3 of my flu, save for a lingering cough that refuses to go away for good. That's a bit like downlegs in a bull market - they end when they want to end, you just have to wait it out and let them run their course. So downlegs in a bull market = the flu.

I also have 3 points to note of this week:

1) Volatility - It is encouraging to see volatility returning in the market. Volatility is what makes the portfolio earn (and lose) money. It is all about positioning the direction of your sails (i.e. whether bullish/bearish and how bullish/bearish) to fit the wind direction (i.e. market conditions) when you sail.* Right now sailing with 60% bullishness for the past 2 weeks in the downleg has resulted in a US$20+k drawdown. But I'm looking ahead for the bull to resume thereafter and when you are 60+% bullish in a strong uptrend that means a sweet reaping of profits. Let's see!

*disclaimer - I don't, and can't, sail.

2) Reminiscences of 2014 - This correction reminds me of the downleg during the CNY period last year, right on the evening of the CNY eve/day one of CNY the S&P 500 fell about 40 points and I was thinking what a way to start the year of the whatever animal. Like I am right now, I was bullishly positioned but waiting for the bull trend to resume. (Of course it did :)). And like the downleg we are having right now, the correction from peak to trough was about 100+ points on S&P 500. So will history repeat itself?

3) Fear - On Friday night before the US markets opened, the S&P 500 futures actually dived down to about 17 to 20 points during afterhours, hitting the 1970s. On a traders' forum that I frequent, a number of traders admitted that at that moment they had lost faith in the bull and wanted to pull out their positions then, and for some it was faith/intuition/some superstition that "gave them strength" or "helped" them to hold on. Some with nerves of steel actually doubled down on their long positions - they appear to have been proven right for now, based on Friday's rebound. Well if you ask me, from what I am seeing out there, emotions are running high in the markets and there are jitters out there. All signs that a rebound is near and the downleg is about to end. A bull market is sustained by fear and needs to climb a wall of worry.

As Colonel Kilgore said in Apocalypse Now during the thick of the action during the Vietnam War to his disbelieving soldiers (who were so caught up in the horrors of war around them then): "Someday this war's gonna end."

Goodreads: The Subtle Art of Not Giving a Fuck

Every now and then, I will come across an article that gets my heart pumping (that isn't erotic literature), that makes me scream "yes!" silently and pound my fist on the bar in the MRT. This is likely the first time this has occurred in 2015 and "Goodreads" will be a collection of... such good reads I come across. Don't worry, it's not that I have become a philosopher-king overnight. I'm just the thinking man's retail trader.

The article that has the honour of being the first Goodread is The Subtle Art of Not Giving a Fuck by Mark Manson. Let me set out my thoughts below on the article and hopefully your interest is sufficiently piqued to read it.

As we age and advance in life, we start to get a little more comfortable. We also come into possession of more things. We get pay raises. Homes. Kids. Possessions. With more things coming into the picture, we own more but we have more to lose. Some of us may feel that we also lose a certain edge we once had. The feeling that you could drop your things down and leave them behind, with nothing to lose. The feeling that you don't give a fuck about anything. Freedom as a bird.

Mark's article struck a chord in me, and revived that feeling in me. It strikes me that perhaps over time I have grown to be giving a fuck about certain things that I do not need to be giving a fuck about. I want to get some of that back in me. In a healthy way without undoing any progress made in life. You can call it conscious desocialisation.

And here's are my takeaways from his article. 3 points from me.

1. Not giving a fuck is about daring to be different. That's different from aiming to be indifferent to all things. The latter suggests protecting one's emotional state by numbing one's response to stimuli, by disengaging. Is that living? The former involves engaging your passions to do what you feel for. Even if everyone thinks it's quirky or weird or wrong. Which one sounds better to you?

Napoleon Dynamite - Quirky, but happy? Happier than most of us?

Have there been times of late where you have held yourself back from doing something, due to how you think society will view you?

2. We need to find a mission in life. Once we do, the issues that used to bug us, will no longer bug us. Remember the auntie who likes to complain about everything and threaten to write to the ST Forum/CASE/STOMP/hardwarezone just to frighten a vendor into giving a further discount? Remember the bitch in the office who likes to make bitchy remarks about other womens' bags/hair/boyfriend/overseas trips? This is because they have not found anything better to do with their life, and so they occupy their world with such "minuscule" issues. Once you find your mission these people simply disappear from your radar. Or at best, you think of them like a tiny bug pest. You have better things to do. Embarrassment and self-consciousness fade away. Nothing can stop you.

Do you sometimes think that the things you have invested time and effort in are actually quite meaningless?

3. There are only so many things we can care about in life. This is especially so as we get older and our time and energy become limited. So please start to think hard about what are the things worth caring about. Priorities. Pardon my love for football analogies but it's like being a Pirlo, an Alonso or a Gerrard. They get on with age but they can still be very effective footballers because they conserve their energies and focus on doing certain things very well. Every move and step they take is measured and deliberate. There's no need to run around the pitch like a headless chicken if you know how to position yourself to be at the right place at the right time. Time your runs up the pitch. Guide team-mates around you instead of doing all the grunt work. Ration your movements, but make them count. That's what we should be doing as we age too. 

Have there been times where you feel you have too many things to do, and yet when you think about what are the things that are important to you, you realise you have been neglecting those most important things?

Trading Update: 10 January 2015

True Profits Earned in 2015 to date: -US$3,759.08
All-time maximum profit earned: US$135,976.98 (amended on 17 January 2015 - the previous number provided was erroneous)
Current drawdown from all-time maximum true profit earned: US$7035.18
Change from last update: -US$3,759.08
Directional stance: Portfolio is 62.21% bullish.

Yeesh the numbers are not looking good this week. That's some fierce red numbers staring out at me, and the maximum drawdown I hit intra-week actually exceeded US$14k. I did mention in the previous update that: 

In the more immediate timeframe the markets seem to be taking a breather and we can expect the S&P 500 to resume the rally from hereon, or more probably after more of a pullback has taken place (somewhere in the low 2000s). So we can expect some more short term pain for the portfolio before we get back into business.

So that's exactly the story of the past week, just that the S&P 500 did slightly more than what I expected and decided to take a frolic and detour into the 1990s. 

Although the S&P 500 has since recovered to 2044, the manner of its climb up back to 2044 indicates a worrying possibility that the S&P 500 has, for the intermediate term, topped at 2094, and a downtrend that could head to under 1800 has begun. This has to be monitored carefully seeing that my portfolio is still very bullishly geared. A heavy fall in the markets (which confirms that an intermediate downtrend is in place) and a bullishly tilted portfolio would not make the best of friends. The short term pain I spoke about previously could turn out to be something more and set back profit gains for some time. Caution is called for! Hopefully the market's movements on Monday can reveal more. I am ready to exit and rejig the stance of the portfolio if the market gives signs that call for it.

Speaking of trading exits, there is a scene in the (wonderful) movie Lust, Caution (starring Tony Leung (Chiu Wai, not the other one) and the lovely Tang Wei) where, if my hazy memory permits, Tang Wei lures Tony Leung into a bar that is embedded with assassins tasked to kill him. Tony Leung has some fun with Tang Wei in the bar initially, but when he smells that something is not quite right he drops everything and bolts out of the bar faster than you can say "Tang Wei rocks!"

Look at the man go. Nobody can stop him from getting out. That's how you should exit your trades when you are sure that your prognosis is no longer right. Anyway Tony Leung survived, of course.

Off-topic: I have been down with a flu since the start of 2015. Mrs RetailTrader is not doing so fine herself. Maybe our health is correlated to the markets? ;) A reminder that health is wealth! 

Review of Personal Finances for 2014

Expenses

Below is the breakdown of my expenses for 2014:

• Property (45%)
• Wedding/Wife related expenses (18%)
• Parents (10%)
• Household (applicances, furniture, maintenance) (7%)
• Food (4%)
• Vacation (4%)
• Clothing (3%)
• Tax (3%)
• Insurance (2%)
• Others (5%)

Expenses incurred this year were hefty. It was the first year since i started tracking expenses in 2012 that I incurred a deficit (i.e. expenses exceeding income). I'm happy to say however, this being the year I got married and bought a home with Mrs RetailTrader, that the two largest money bombs (which together with household related expenses added up to 70% of expenses) are not going to be recurring costs, so from an expense perspective I'm definitely looking to trim down on total spending for 2015. Assuming the bulk of these expenses fall away in 2015, I am looking to trim expenses in 2015 by half.

I however expect expenses for food to creep up as I'm no longer staying with parents (for most of us Singaporeans, staying with parents = free food lol!). I expect expenses for vacations to remain constant, and expenses for clothing to hopefully fall as well as some of these costs were wedding related (e.g. making up a wedding suit). Tax unfortunately is projected to increase; insurance should remain the same.

Passive Income and Financial Freedom

Given that 2013 was quite a stellar year for the portfolio, the percentage (and absolute amount) of my total income attributable to passive income fell in 2014 (as compared to 2013). Here's hoping things will pick up. 

I'm a follower of the great plan espoused in Your Money Or Your Life, where your financial journey undergoes the following stages (I'm paraphrasing very liberally so pardon me):

• Stage 1: In debt
• Stage 2: Income exceeds expenses, reducing debt
• Stage 3: Positive net worth, start to generate savings, which in turn generate passive income
• Stage 4: Passive income exceeds expenses - this is where you become "financially free" in that you can save 100% of your salary and can make the decision to "work for fun"
• Stage 5: Passive income exceeds expenses plus savings buffer (i.e. the amount of savings you want to achieve monthly/yearly) - this is where retirement becomes a realistic option.

Most of us in the Singapore personal finance blogosphere are conscientious savers and savvy investors who are in Stage 3. Everyday we build our savings moats, laying them brick by brick, waiting for the day we can hit Stage 4. As there is such a huge gap between Stages 3 and 4, it would be useful to have some parameters to measure progress as one works his way from Stage 3 to Stage 4. The parameter I propose to use is the fraction of one's passive income over his total expenses. Hence, for example, if a person were to generate $50k of passive income in a year, and incur $100k of expenses, that fraction would be 50% and if you think about it, it indicates that he is 50% of the way towards being financially free in Stage 4. I'm at 19% for 2014 although 2014 was a one-off anomaly due to wedding and new home. Just for purposes of comparison, i was at 85% for 2013 (another anomaly though because of the better-than-usual performance of the portfolio - I can't expect to be reliably generating that sort of returns every year). Where are you in your journey today?

My next expenses update (for the month of January 2015) can be found here.

Trading Update: Annual Update for 2014

True Profits Earned in 2014: US$36,943.07
Current drawdown from maximum true profit earned in 2014: US$3,276.10
Change from last week: - US$2767.77
Directional stance: Portfolio is 58.78% bullish.
Annual returns: 10.18%

Looking back

So, the year closes with a "bang" of sorts (pardon the pun but my last memory of last night was watching Big Bang perform during the New Year's Day countdown on TV). The portfolio seemed destined to hit new highs before I hit the bed last night but instead the markets went into a woozy and suddenly I have a drawdown. That's trading for you. But as you can see, the "nice figure" annual return target has been hit and I can say this has been a satisfactory year (from a trading perspective). It would have been nice to hit 40k in absolute figure profit but yeah, greed is good.

I did not manage to hit the heights of 2013 (20% returns) or the great year that began this journey, 2011 (27.6% returns). If you think about it and just stare at the charts for S&P 500 in 2013 and 2014, 2013 and 2014 are very similar. Generally part of a steady bull run with some dips along the way, which are opportunities to make more money, distributed at points during each year. I look at my trading records (and look at them again) and can't quite explain why performance was twice as good in 2013. In fact, there were quite a few times in 2013 where I allowed greed/loss aversion tendencies to get the better of me and traded "wrongly" and this caused the directional stance of my portfolio to be veered a little dangerously in one direction (where the risk of large losses grows, i.e. not ideal! Danger, Will Robinson!), yet it was from positions like this that, when the market direction turned eventually, I was able to reap in copious amounts of profits. In 2014 I was more disciplined and stuck to the rules largely (except for the weeks where I first began this blog), and yet "still like that". Could it be that the parameters I've set as to how bullish and bearish I allow the portfolio to become are somewhat more conservative? Am I "outgrowing" the safety nets I built for myself in the initial years? Could it be that it is time to open up the floodgates a little, and be amenable to risking a larger drawdown in the hope of larger returns, in order to take things on to the next level? Again, pardon the football analogy but is it time to give my players more freedom to express themselves rather than being obsessed with marking, constantly staying in position and tight defence? Is it time to be Liverpool rather than Chelsea? ;)

I have no answers at this point and probably will need to pore through my trading records again to see if there is anything else I can glean from the past.

Above is a chart depicting my trading capital since June 2011 to date. Naturally, the trading capital does not quite correspond to trading performance because it is contingent on other factors, such as (but not limited to) my salary/bonuses and expenses. The dip in 2014 which "interrupted" the steady progress over the years can be proudly attributed to my acquisition of Mrs RetailTrader and our matrimonial home :)

Looking forward

As I alluded to above, it is time for me to relook the strategy to see if it can be tweaked to increase the profits. If 2010 saw version 1.0 of the methodology being implemented, and 2011 version 2.0, and 2012 version 2.5, and 2013 version 2.7, it's time to take the methodology to the next level - version 3.0. What I mean by this is to continue to refine the "rules" for which the portfolio is managed, i.e. its bullish and bearish limitations, and parameters for maximum tolerated drawdown. Of course I don't believe in absolutisms and false dilemmas, any changes I make will be evolutionary and nuanced, I'm not expecting to make any 180 degree wholesale changes. Tweaking will be the name of the game for 2015.

S&P 500 looks set to continue the bull run (there is not enough complacency in the markets as yet) and the current indications (which can change in an instant so please do not rely on anything I say here on market direction for your own trading purposes! These updates are intended more to share my thoughts on my trading process than to provide any sort of advice) are that the markets can go all the way to the high 2100s to 2500s before topping. So I say we enjoy the ride up and when the bear market is confirmed, the portfolio will need to switch to "bearish" mode. Based on past data the portfolio tends to perform better with volatility, which will be present in large amounts in a bear environment so I am actually looking forward to the next bear. As I told a friend my age yesterday, the upcoming bear could be the opportunity for people of my generation (who did not have much capital to "cash in" on the financial crisis of 2009) to really grow our pot for retirement (go big or go home!). Of course, step by step. It could be that this bull market (which is really a relentless one, as it is a reaction to the crazy fierce bear of 2008-2009) could go all the way to 2016 so let's be patient, bank the bull market coin first, continue to save and accumulate capital for our trading "warchest" and take things step by step (and remember to enjoy life on the way).

It's difficult to set targets for 2015 because ultimately you cannot control when the bear market wants to begin but hopefully I can at least hit 10% returns again for next year. And never forget rule number 1. Beyond that I hope to recapture the performances of 2013 and 2011.

In the more immediate timeframe the markets seem to be taking a breather and we can expect the S&P 500 to resume the rally from hereon, or more probably after more of a pullback has taken place (somewhere in the low 2000s). So we can expect some more short term pain for the portfolio before we get back into business. As we only have one more trading day in the US before the weekend, my next regular trading update will be on 10 Jan 2015 instead of 3 Jan 2015.

Cheers and here's hoping for a good 2015! I wish each reader health, happiness and wealth!