Trading Epic Fury (Part 10)

Today I will continue Part 9 discussing red flags ignored when making trades detailed in (3) from Part 7.

The fourth final red flag was being inadequately prepared for the Good Friday holiday week. Per Google AI:

      > There is a distinct seasonal tendency for the stock market to be bullish during
      > the week leading up to Good Friday, with a high probability of gains in the days
      > before. The market often shows positive performance in the days leading up to
      > the holiday, with Holy Thursday showing particularly high average returns.

I’ve never been completely sold on market seasonality due to limited sample size. I acknowledge the [at least] urban legend as probably enough of a possibility that I shouldn’t take any extreme risk. That’s kinda what I did on Mar 30.

In isolation, I wouldn’t say the final red flag was sufficient reason to do something different. I probably would have been fine with a 3% market rally on the week rather than the day. The presence of multiple red flags is better reason to second-guess.

Going forward, potential daily trading checklist items include:

• Are my greeks within normal limits after execution of the proposed trades?
• Is the market in a crash environment (this third indicator may be sufficient).
• Are any seasonal conditions present?
• Is this a holiday week?

Some clarification is needed for the hope indicator from Part 9 paragraph 5. What I would like the market to do on any given day and what I need the market to do are two different things. I may never want to see things like a Black Swan but hoping to avoid one does not trigger the hope indicator. I’m more concerned about hoping to avoid normal market activity that may substantially hurt me. On the flipside, if I need outlier events to avoid large losses then the indicator is also triggered.

It may be that hardly a day goes by I don’t hope for something. This argument seems weak, however, because on most days I truly don’t care what the market does. One reason is because I don’t aim to profit every day. I hope to show gradual profit over time in the face of expected intermittent losses. Maybe I also hope to profit on a higher percentage of days than the market climbs [which hasn’t even been tested so maybe it’s not an actual desire of mine].

Upon further review, I don’t believe the hope indicator triggered on Mar 30. Logging in to see -1800 with big losses are what forced me to make such a drastic Mar 31 upside adjustment. Had the market rallied 1% then maybe I roll up and out with a trimming of upside exposure and little discussion ensues.

I will continue next time.