2018 Incident Report (Part 1)

I have been getting more organized this year by converting incomplete drafts into finished blog posts. Completing this draft made me realize I was overdue for a performance report.

As it turns out, I had a never-completed mini-series from July 2019 about my 2018 performance.

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Originally, this was supposed to be an incident report of major losses suffered the week of October 8, 2018. Now, it’s going to be an incident report for all of 2018.

After having my best year ever in 2017, 2018 was decisively my worst (including 2008 when I actually made money). I took big losses in February, October, and into December.

One of the biggest sources of both frustration and optimism is that whenever I experience big losses, I always seem to be able to look back to a point where I can easily say “I should have gotten out” and avoided the worst. The big question is whether these points are visible prospectively. Anything knowable only in hindsight is mirage and not a useful indicator.

I feel like I need to do a few different things every day to maintain trading preparedness.

First and foremost, I need to develop a checklist with daily monitoring parameters. I will take pre-planned action when triggers get hit. The main focus of my trading will then be to follow the checklist: no questions asked.

I had a monitoring spreadsheet created this year for naked puts. I stopped using it once I closed partial positions. My discipline waned throughout the remainder of the year. This needs to be iron clad throughout. Discipline, in the trading business, may be said to be everything.

One repetitive theme I have noticed about myself is that when I stop the bleeding, I rarely stop the bleeding. If I use some sort of equity stop-loss or [set of] indicators to determine whether I am in [for at least a percentage of my standard size] or out of the market [entirely], then that needs to be it. I always seem to fear the whipsaw. I fear being out when the market suddenly reverses thereby leaving me on the sidelines. This fear has not helped because time and time again, I have maintained a partial position that proceeded to aggravate my losses.

Here are three things to work on for the coming year:

1. I need to feel comfortable in the markets.
2. I need to look at the markets more.
3. I need to have an approach to trading when I actually trade.

I will discuss these further next time.