Sunday, February 27, 2011

Friday Recap - A Much Better Day

I posted on Thursday that I had my worst trading day in recent memory.

I didn't make any major mistakes, the market wasn't crashing, and my positions were fairly well diversified. It just so happened that virtually EVERY long and short position I had was down a couple percent or more. Statistically that is just going to happen every now and again. As a result I suffered a loss of almost 3% of my entire portfolio.

I reacted the only way I could, I cut back a few positions on Thursday to reduce my overall risk.

It's amazing how much of a difference a day can make. Friday saw my entire portfolio recoup about 2/3 of Thursday's losses - even after closing some positions on Thursday for losses. My trading accounts actually recouped 100% of their losses (some of the longer-term accounts were still down a little over the 2 days).

The lesson here is, when the markets are kicking you in the teeth don't panic and don't try and make it all back in one day. The worst thing you can do is double up and add to a losing situation. Almost as bad is to panic and sell everything you hold.

By cutting back on some positions that were bleeding, I was able to increase my cash position enough to feel comfortable initiating new trades in HK and HNU.TO later in the day. Those two trades were up 6.0% and 7.1% respectively on Friday.

The end result is I'm back to being in the black for the month, and my streak of 9 consecutive winning months appears to be intact.

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