Hope everyone is doing alright.
Seeing today's action I looked at recent closed short positions, and mix of "looking for justice" and curiosity, but there was no justice, not today.. Just look at GME and GSX. Whoever is trading them up doesn't care about market or tomorrow. I think GME wasn't on my list but it's probably more of a luck than doing something particularly smart.
Changes I made back in August to both short strategies paid off handsomely. If anyone remembers, my logic was - as market was hitting new highs despite the state of economy and so many people having nothing better to do than learn trading from home, we might as well see a bubble follow.
My pre-august versions were fine for 20 years, except bubble in 90-ies, where they encountered few, somewhat short 20-40% DD bursts. Which didn't seem unreasonable as that market type is pretty rare and rate of recovery was not too bad.
Basically what I did was reducing individual position sizes, average market exposure and used more bubble-friendly setups and ranking. All changes combined managed to keep ARR close to original but DD cut to ~12%. As of now old version is in ~34% DD (basically close to historical max during 90-ies), "after-august" version is around 15%. Sounds pretty bad but in a context - not really. This system is not expected to make money in such market.
Anyway, this post is getting too long. One more thing - good to have thought thru exposure management, probably not too much of a problem for discretionary traders. But with automation lots of things can go wrong if market moves fast and there are many anticipated positions hitting their entry points. Pretty much everything my long systems were willing to get into was triggered. Highlighted in red trades that were not taken. Not often I see list that long. Once again, some work put in July to assure correct exposure management automatically pays off.
Val
