HuggieBear's Thread of Public Shame

It was the best of times, it was the worst of time...


Here are this weeks stats:


Weekly Gain: +3.5%
YTD Gain: 68%
Current % drawdown: -2.5%


This week started off horribly, where on Tuesday I could have suffered a death blow. I was terribly long crude futures during Tuesdays selloff, and didn't do the smart thing and cut my losses. I did manage to minimize my losses, but still started off the week down another 3%.

I righted the ship by preparing for a bounce off of 1170 which was thankfully delivered on Thursday...much exceeding my expectations.

Thursday and Friday turned out to be huge days, not only recouping my losses from this week but also making back about half of my losses last week.

I spent considerable time reevaluating my system over the weekend and will put, as I said last week, most of my focus into religiously following said system. I have a good sense of what the expected drawdowns will be and will try to limit my discretionary trading for the next 6 months. If my system performs in line with backtest results, I really won't need to do anything else anyway.


Deadender, thanks for your advice last week...it is where my thinking was as well but i failed to follow my own instincts and instead got caught up in the hype.


Going into next week I am very long...I am expecting the market to trade up on Monday and if we reach 1210-1220 I will hedge all my positions in very tightly for December. It will take the edge off some of my profits but also protect my downside.

Fundamentally, i need to hedge less and just be willing to accept the drawdowns my system delivers. BUT, i just don't believe one can ignore the current market risks associated with a two month parabolic runup at the same time so much sovereign risk is coming to the fore.
 
There will be no Santa Claus this year....


Weekly Gain: -4.9%
YTD Gain: 53%
Current % drawdown: -7.3%




Things are going about as bad as they possibly could be going right now....here are my three key failings:

1) Mechanical Swing Trading System -- I have continued to not follow my system religiously. It has been doing well. I have not. I've decided I am using too much leverage and that is the key reason I am not sticking to the signals. With only a 30% MDD over the last 15 years, I thought I would be ok with it, but it appears I am not. So i will ramp down my position size until the MDD is less than 20%, possibly 15% and start again.


2) Discretionary Swing Trading -- I could not be any more out of sync with the market. I am losing on almost every discretionary trade. I will majorly lighten up or cease discretionary trading until I feel I am back in sync with the market. This happens to me occasionally, and Im confident I will recover. All, and i mean ALL, of my worst discretionary trading periods during the last three years have occurred during times of government intervention. I believe it is the sheer magnitude of the moves which catches me by surprise. Too bad, because they should be great opportunities to profit.

3) Crushed on a core long position -- I have one large core long equity position that i can neither sell nor hedge for various reasons. It has no correlation to the market on a day to day basis. It is about 50% of my portfolio and as the market zoomed up last week it dropped about 15%. This accounts for more than half of my drawdown, and there was largely nothing i could do about it.


Everything that could go wrong, did go wrong. Because I am doubtful i will get new signals and because i will reduce my discretoinary trading, I expect to end the year not much changed from where I currently stand. This will be a test of patience to wait until the market gives me another good opportunity. I do have a few speculative short positions on right now, but I may close them monday if there is no significant negative news over the weekend.

I would look to short again as the market approaches 1250, as I assume we will continue this rally from hell next week.

Ho Ho HO

HB
 
And The Suck Goes on...


Weekly Gain: +2.2%
YTD Gain: 59%
Current % drawdown: -5.3%




In short, i currently suck. This is the longest stretch of bad trading I've experienced in a long time. I managed to eke out a gain this week, but it was in spite of several stupid trades on my part.


I failed to take my DecisionMoose signal (20% of my strat) and of course it appears to be a big winner. I was hoping to get in at a better price than the signal, but it immediately ran away from me. Live and learn....maybe that is how the good decisionmoose signals act.

I also sold off the long term core position i was holding that caused so much of my recent drawdown. Had i held onto it, i would have made 2% more back this week. I can't fault myself too much here because it is good to be free of that unhedgeable position, but my timing could have been better.



On the bright side, some of my "open signals" that i had prematurely sold out of when I should have been holding sold off significantly. This gave me the opportunity to buy back in, which i did, at half positions. So i'm long half positions in EWZ and FXI. If China doesn't continue to melt-down i should make a few more percent before the end of the year. ON the other hand, if China raises rates and they sell off further, I will stop out pretty quickly. Hence, a good entry point even though the signals were already open.


I have some short exposure in the US that Im hoping will hedge any downside risk. I figure if china, brazil and commodities keep selling off, the US market will not keep rallying.

we will see...the bright spot in all this recent poorly disciplined trading is that even with absolutely everything going against me, a number of terrible discipline related mistakes, and being totally out of sync with the ebb and flow of the market, i'm still only down around 5% from peak. Things could be a lot worse, and 5% is an easy drawdown to come back from.


Now, I just need to realign myself with the market...
 
quick follow-up....looks like China's CPI came in way hotter than expected and a rate rise this weekend is likely. If that comes to pass it likely means my FXI/EWZ positions will get crushed this week. I'm short some US names so may offset some of my losses, but it likely means lights-out on further gains for the remainder of this year.

We shall know by Sunday...
 
Quote from HuggieBear:

quick follow-up....looks like China's CPI came in way hotter than expected and a rate rise this weekend is likely. If that comes to pass it likely means my FXI/EWZ positions will get crushed this week. I'm short some US names so may offset some of my losses, but it likely means lights-out on further gains for the remainder of this year.

We shall know by Sunday...
More...

Mid to Late December is the best time to be invested in stock markets. Go long and make some money, the US economic numbers are fantastic lately.
 
well, no doubt you are right...god knows the market has proven that point over the past couple of weeks.


BUT


bottom line is the market is up over 19% in about 90 days...i just can't get with the R/R on entering at this point. i will buy any pullback, however.

i am long brazil and china, mind you....so its not like im sitting 100% short.
 
The carnage continues...


Here are this weeks stats:


Weekly Gain: -0.5%
YTD Gain: 58%
Current % drawdown: -5.8%


Nearly everything continues to work against me. I have really slowed down my discretionary trading because i don't understand the market. Actually, i understand it but can't bring myself to get long just now. So i will wait.


I did make a half percent on two discretionary trades in crude last week, which actually reduced my overall damage. My trades in Brazil and China are killing me. Not much more downside before I hit my stops though, so we will see.


In lieu of frequent discretionary trading, I have spent the last several weeks developing a new system. I've developed a long/short system trading a basket of 20 commodity futures, and I'm very happy and confident with the results. I've tested it over thirty years of data and feel pretty confident that it will be profitable.

My motivation for building this system is based on a big picture worldview that believes commodities are going to be in a long term, highly volatile bull market over the foreseeable future. I wanted a system that will take advantage of that, and the most direct way is through futures.

I began trading the system last week on a signal in Wheat, which thus far has gone against me.

I now have two systems that I have a high degree of confidence in, both of which are medium-to-longer term. I've decided to suspend essentially all discretionary trading and focus on just these systems for 2011. If they produce the results i've seen in my analysis, then I won't need anything else.

My discretionary trading will be limited solely to hedging activities when my systems produce an overly leveraged portfolio basked leaning too far long.


As we move into 2011, I will also modify my diary to discuss the signals and trades I'll be taking, and how they turn out. I don't expect more than 50 or so trades per year, so it will be easier to focus in on the details. I'm pretty sure I will close out this year with more than 5000 trades and probably $75k in commission fees, so it will be a nice change.


Here's hoping that China and Brazil bounce back this week. I will also be opening a new position in Vietnam, per a signal that was generated.

Cheers
 
Absolute carnage...what began innocently enough has turned into a serious drawdown.


Here are this weeks stats:


Weekly Gain: -2.3%
YTD Gain: 51%
Current % drawdown: -8.0%


I am long China, Vietnam, and Brazil, and all have been getting killed. I am not far away from stopping out on all three, so there is not much more downside with these. I figure if everything goes completely against me, i'll be down 12% or so at the end.


My new commodity trend trading system is off to a horrible start. I got absolutely murdered on a short lean hogs trade last week.

I'm definitely concerned at this point that an 8% drawdown is going to turn into a 20%+ drawdown. Introducing this new commodity system is obviously a big wildcard. I'm confident that it is a winning system; however, the biggest risk is that it has been having an absolute banner year. I'm getting signals to go long in many markets that are at or near historical 30 year highs.

But, I am committed to pushing through. I will either be right about this, and very wealthy within a few years, or I will be wrong and will lose a substantial amount of money.

2011 will definitely be interesting...
 
After further consideration, I've decided i can't be comfortable starting trading the new commodity system i've developed at this specific point. The system itself has far outperformed its historical average over the last six months, and the signals i'm getting are to buy commodities that are at all time highs.


I am going to close out the positions I've already opened, and wait until the system has four consecutive losses. Once it encounters four consecutive losses, I will begin actively trading it. That could be next month or it could take six months.

I have no idea if that makes sense statistically or in terms of market behavior, but I would rather start trading it at that time rather than at the tail end of a huge winning streak.

Net result is I will, for now, eat the losses I experienced last week by beginning to trade this now.

I should have realized this from the start, but i do have a high degree of confidence in the system and was eager to put it into action.

But, i'd rather do this than jump in and buy cotton, sugar, and soybeans at 30 year highs...
 
Quote from HuggieBear:

After further consideration, I've decided i can't be comfortable starting trading the new commodity system i've developed at this specific point. The system itself has far outperformed its historical average over the last six months, and the signals i'm getting are to buy commodities that are at all time highs.


I am going to close out the positions I've already opened, and wait until the system has four consecutive losses. Once it encounters four consecutive losses, I will begin actively trading it. That could be next month or it could take six months.

I have no idea if that makes sense statistically or in terms of market behavior, but I would rather start trading it at that time rather than at the tail end of a huge winning streak.

Net result is I will, for now, eat the losses I experienced last week by beginning to trade this now.

I should have realized this from the start, but i do have a high degree of confidence in the system and was eager to put it into action.

But, i'd rather do this than jump in and buy cotton, sugar, and soybeans at 30 year highs...
More...

This sounds like a wise approach. I especially like the part about waiting for 4 consecutive losses before starting up the new system again, as this is a tactic I often use (only trade after X number of failed signals) and it seems to work well. Easier on the psyche if nothing else.

Good luck as you move forward.
 
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