Trying to make it on my own

Today I sit here somewhat annoyed and discouraged, being down about 20k MTD on the core trading strategy in just 3 trading days. Partly I am peeved from being down about 6k on a marginal trade today that arguably I shouldn't have taken. Making things significantly worse has been my large net long exposure in this strategy (averaging around 300k net long) each of the past three days, all while the market has tanked intraday. As a reminder, I base my trades on company specific factors, without consideration for any macro view. Usually I don't try to hedge out the macro risk, since these are just intraday holding periods. However, this week, I estimate that if I had hedged, I would be about at breakeven or better.

Honestly I feel like I've been a bit unlucky with my hedging in the past, being down a total of 10k from hedging activities, so I prefer to just not hedge, since these are just intraday positions. Days like today though, make me want to just institute a consistent hedging policy.

Also souring my mood is the fact that I've been sick..

I find that at moments of stress like this I tend to want to take a break from trading. However, in my mind I know that preserverance is more important.
 
Would you play football on a 100 degree day while sick?
Do not trade while sick.
Perseverance is not worth it.
You must feel on the top of your game to trade.
 
My trading style is a bit different. Most of my time is spent researching companies to prepare myself for the actual trading decisions. So there's really no need to take a break from research
 
Currently down 39k MTD, with the long term portfoilo down 25k, pairs strategy down 3k, and core trading strategy down 10k. Represents a -5.6% MTD move.

The long term portfoilo's performance is consistent with the magnitude of the market correction. Since this is purely a bottom up portfoilo, I will attempt to ignore the macro volatility and stay the course. I remember I held the same philosophy in 2008, and went from a +45% year to a -30% year in a matter of 4 months. While this time I have far less macro exposure, I also do not have a job.

The new pairs is experiencing a significant draw down. This time I have no earnings events to blame. My suspicion is that the model falls apart at time like this. While I am beta neutral, beta is a highly flawed metric when accessing macro risk when dealing with a real market correction. I have therefore stopped placing any new trades for the time being.

Core trading strategy has recovered some what from the -20k levels I mentioned yesterday, but I am annoyed that I have made a couple of mistakes trading today. Unfortunately, I am still a bit too emotional when it comes to trading. These 10/20k swings are no joke for me..
 
After a great trading day today (interestingly, making all my money on the long side), I am near break even for the month.

MTD Results

Core strategy +35k
New pairs strategy -3k
Long Term strategy -36k

I am pleased that I was able to move from a -20k start in the core strategy at the beginning of the month to the +35k result as of today. I am happy with the way I have traded recently - I believe a number of trades were tricker than usual, but I managed to analyze most of them correctly. These results are all the more impressive considering there was a period of about a week and a half where I sat out from trading, on account of two factors: 1. I was busy looking for a new apartment, 2. I recently broke up with my girlfriend, and was a bit depressed.

On the other hand, I have basically capitulated in a way and closed out many of my long term positions (this occured around S&P at 1200), bringing myself much closer to a net neutral position. Frankly, the drawdown I experienced in this strategy was more stressful than I anticipated, and I decided it was no longer worth holding on to many positions which were marginal positions to begin with. It is quite an amatuerish thing to come to this realization now, but it is what it is.
 
August results:

Core strategy: +37k
Long Term Strategy: -14k
New pairs strategy: -3k

YTD

Core: +343k
LT: +18k
New -3k

Fairly flat in the core strategy since my last update. Overall what I would consider to be an average month in the core strategy.

Giving up on the new pairs strategy for the time being. I am suspicious that the strategy performs poorly when macro factors dominate, and I feel like this strategy may be taking up more of my time than I would like.

I'm close to a net neutral position right now in the long term strategy. My hope is that there is another leg down in these markets, which will give me the opportunity to pick long term positions on the cheap. While I'm not a macro guy, my suspicion is that the market will not bottom until the economic data points stabilize.

Attached is 2011 equity curve for core strategy.
 

Attachments

Started sending out a few resumes recently. Generally applying to some junior to mid level analyst positions on the buy-side.

While I would have to take a big pay cut relative to what I expect to make trading, there are many intangible benefits for working a 'real job.' The biggest reason is that I still want to learn more things, and I find I'm having a hard time doing that on my own.

That being said I imagine that finding a job that is up to my standards will be tough. I don't consider myself too picky - almost any hedge fund will do regardless of how small and unknown they are. I may even consider mutual funds despite my low opinion of the industry. Sell-side research will be good too, assuming its a bulge bracket. However, I'm not sure my resume's looks good enough to get me these interviews at this point, and the job market is quite challenging.

I have put my recent trading on my resume. It's probably better than putting it on there as opposed to having a 2 year gap on my resume. I also included specific numbers by mentioning that I've made about 600k, representing about a 400% return over the past 2 years. I don't expect anyone to be impressed by this-I'm not even sure if this 'track record' will even help me. A big part of the problem is my short term trading will most likely be deemed irrelevant to the type of analyst roles I'm applying for, which generally pertain to long term investing. While I am a longer term investor by training, I developed and focus on my trading strategy simply because it beats everything else I know in terms of consistent profitability by a wide margin. Even if this strategy is not directly relevant to any analyst roles I apply for, it is my hope that the fact that I was able to develop and implement such a strategy at least demonstrates some understanding of the equity markets and a passion for the business.
 
Quote from doublet83:


I have put my recent trading on my resume. It's probably better than putting it on there as opposed to having a 2 year gap on my resume. I also included specific numbers by mentioning that I've made about 600k, representing about a 400% return over the past 2 years. I don't expect anyone to be impressed by this-I'm not even sure if this 'track record' will even help me. A big part of the problem is my short term trading will most likely be deemed irrelevant to the type of analyst roles I'm applying for, which generally pertain to long term investing. While I am a longer term investor by training, I developed and focus on my trading strategy simply because it beats everything else I know in terms of consistent profitability by a wide margin. Even if this strategy is not directly relevant to any analyst roles I apply for, it is my hope that the fact that I was able to develop and implement such a strategy at least demonstrates some understanding of the equity markets and a passion for the business.
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Correct me if I'm wrong, but you started out by designing a system for two months at your last job and then went on to trade it for 2 years, making a 400% return?

That's pretty good.

Good luck with the job hunt.
 
In a way that is accurate. While during my last two months working I did spend a lot of time working on my current trading system, it is also the product of my years of experience working as an analyst. As I've said before, my system relies on using fundamental analysis to predict short term price movement after company events. Part of what this requires is that I be able to access a company event the same way a fundamentally based portfoilo manager does. There's no way I would be able to do this on just two months of development alone.

Also my strategy as evolved quite significantly over the past two years compared to what I originally imagined. If you look at my equity curve, it has been steadily profitable from the beginning. Today I am actually quite surprised I was able to be so profitable at the beginning. I'm not sure if I was just lucky back then, or because it was easier to be profitable at smaller amounts of capital deployment.

Also, the 400% return refers to my total portfoilo. I'm not sure what my return would be for my core strategy, and I'm not sure a percentage return is meaningful for it.
 
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