No. Back then I was working 60+ hours a week in the medical industry, and investing was more of a hobby as I built up my savings.
I had been doing a lot of research and concluded that Chinese stocks in
2013 were the cheapest they had been in the last 40 years (from a
valuation perspective). US markets were making all-time highs, yet
Chinese stocks were still 40% below their 2007 high, and traded at
around 7-8X earnings, while the US markets traded at around 18X
earnings, despite China outpacing the US in GDP growth by a wide
margin.
So I took my entire $50,000 and bought the 2X Chinese ETF (XPP)..
..it really wasn't that risky of a trade, especially considering that I
was single with a nice income to back me up. I also decided to put
40% of my parents savings into the trade as well.
Well, lo and behold, suddenly Chinese stocks took off and didn't look
back, and I kept adding on the way up. At one point, between my
parents and my trading account, I made $70,000 in one week on
the combined position. It felt incredible.
The greatest part (and what ultimately lead to my downfall) was
that despite this massive run-up in my account balances, the Chinese
stock market valuations were still incredibly cheap by Western
standards (P/e of 7X climbed to a p/e of only 12x).
After comparing the chart to the multi-year bull market in US stocks,
and previous bull markets in China and Japanese stocks, I concluded
that we were only in the 3rd inning of this move, and that new a new
bull market was born in China that could possible run for the next 5
years.
And that type of thinking, I have now found out, was a mistake.
If you run backtests of S&P 500 trading strategies, you find that
buying weakness in an uptrend backtests well (buy the dip). Similarly,
buying after extended sharp upmoves doesn't work well ...this is not
necessarily the case when dealing with Chinese stocks...Chinese
investors love stocks after they have already made huge up moves,
and they hate stocks once they have started falling.
I mention this, because my thinking at the time was that even if the
Chinese stock market made a major top, I would be able to get out
because US stock markets historically have nearly always made a
double or triple top before falling meaningfully, so I would be able to
get out with not much damage.
Not the case with China. In 2015, my XPP position fell -12% in one
week in 2015. Like I said earlier, I was working a very demanding job
at the time, so by the time I actually had a chance to sit down and look
over my accounts, I had already taken a big hit. I said to myself,
"okay, once the market tests the multi-year high it made last month
(again, US stock market logic) I will bail on the entire position."
Well, that moment never came. Little did I know, that mom and pop
investors all over China were levered just like I was, and once the selling started there was nowhere to go but down.
The only good part of the story is that I didn't buy the top - 18 months
after plowing into my genius idea I was back to square one with the
same amount of money in my trading account that I had started with.
Learned a painful lesson though, that is for sure. I actually think the
experience was very beneficial in a way though - nowadays, no matter
how good something looks, my first thought is ALWAYS "how much
money can I possibly lose here?" Since that awful experience, I have
never lost more than $5,000 on a trade, due to my risk-management
mindset. The downside of this new wiring, is that I probably no longer
have the gumption to put the petal to the metal which is necessary if
you want to be the Dan Zanger or Larry Williams of the trading world.
Just trying to be a consistent singles hitter nowadays, not a homerun
hitter. Backtesting and quantifying things had helped tremendously.
