Market update 22nd March 2020

Market update 22nd March 2020

Wow, what can I say.....I have never seen anything like this in the financial markets since I began trading in 2011 and its the first time in a long time where I haven't placed a stock trade in 3 weeks. Only a month ago, I was cashing out of profitable positions in anticipation of a correction. February was a big month and I locked in some great gains which has me well ahead for the year (financial year in Australia runs from July 1 to June 30). 

There's two things that I have taken out of the recent turn of events. The first being the ability to sell into the big blow off moves higher in the stocks I was trading. I scaled out of my trades as they moved higher, and made some great gains. More importantly, I achieved large risk to reward trades of 5-1 and greater. By that i mean, if I set a 7% stop loss, I made 5x7% = 35% gain. For me, these trades ensure my equity curve continues to move in the right direction.

The second item encompasses where I could improve. The first of these was the remaining small partial positions that I held into the first 3 days of the correction. Had I cashed out of these positions  earlier, I would be sitting on 50% gains for the financial year, however, holding on to these has meant that I am only sitting on gains of 39.5% for the financial year. This is something I will continue to assess in the future. Whether the downside risk, outweighs the upside risk.

The other item i'd like to point out is that despite exiting my holdings in advance of the recent large correction, i never though about scanning for short positions. Because i am a predominantly LONG ONLY trader, I noticed there were very few constructive setups and this gave me a hint that we were coming to the end of the February rally. However, I never actively looked for any short positions of which in hindsight, there was an abundance of setups that mirror my long setup in reverse. Had I connected the dots, I could have flipped the switch and taken some short positions.

The important take for me out of this is that I have summarised what has occurred, what I have done right, and what I need to continue to work on as a trader to enhance my performance and skills. You should be doing the same. Trading is an art that requires practice and analysing to achieve stronger performance.