Improving My Trading Results

By: ispeculatornew
Date posted: 06.15.2011 (5:00 am) | Write a Comment  (1 Comment)

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Investing requires a lot of discipline and there are many different reasons why. I think one of the biggest tests for an investor is when things start to head downhill.  If you have not had these moments, they will happen. Sooner or later, you will feel like you are losing much more than winning on your investments, that your timing is off, or you are buying too high and selling too low. It can last a few days, a few weeks and sometimes much more. Some of the best investors have gone through slumps that lasted for months and sometimes even years. That is when the ultimate test occurs and when it’s important to ask yourself some questions.

Why? Because the alternative for many investors is to start changing their trading methods and that can often lead to disastrous results. What happens to some investors or managers when they’re on a losing streak? Just think about the casino when certain players become desperate after losing a few straight times. Panic is never the smart way to act. Of course, certain types of trading are much more likely to run into these types of problems.

In this blog, I have discussed ETF passive investing and any type of passive investing is not likely to lead you to serious slumps apart from the major market crashes. Passive income dividend investing is also less volatile and while you may have bad timing and bad selections, chances are that the downturn will not be as severe. However, for trades like our long & short trades, we are much more vulnerable. Case in point, the past two years, I’ve had terrific starts with returns well above my objectives. However, for 2009 and 2010, trades done later in the year have been much more problematic. They have been so negative as to bring my annual returns down to solid but not exceptional results.

Are The Results Significant?

It has only happened in two different years and it could be due to bad luck. The results for these trades has been so much lower than other trades though that I have my doubts that this is simply bad luck or coincidence.

Why Are Later Trades Not Performing As Well?

There is no clear answer. One thing I tried to figure out was: “Am I investing in a different way in trades done late in the year?.” One of the things that I believe is that it might be difficult to select trades towards the end. Why? Because while my stock picks are usually closed fairly quickly, they are made with fundamentals in mind and thus should be good in the medium to long term. Such strategies are much more difficult to execute in the short term as momentum and short term movements have a much more important impact.

What Should I Do Differently?

Once again this year, stock picks have been performing above expectations so far this year and I am very hopeful to be able to end the year better.  What I will do this year is not open any new trades after September 30th. That will mean less trading and thus less profit expectations. However, I do think it will improve the long term performance by helping me avoid short term gambles.

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1 Comment

  1. Pingback by Weekly Dividend Links — June 17, 2011 @ 3:39 pm

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