Well, this is what I wanted to happen. I wanted the readers of the blog to experience the psychology of a drawdown and losing streak in real time (but hopefully not in their real accounts).
This morning [[TWM]] gapped down beneath the stop, so I closed the position out atÂ the listedÂ open. This unfortunate circumstance is a very real threat to anyone using stops that are left on overnight.Â The gap beyond the stop caused the system to experience its biggest loss on a single trade, equal to rougly 1.25% of equity.
[[SRS]] was also stopped out, but did not gap beneath the stop on the open.
But back to the drawdown. 6 losers in a row is the longest losing streak the system has ever experienced, in the two year history available for the ETFs it trades. The win/loss percentage is now beneath the 2 year average of 60%. Perhaps this is a good time to consider trading the system, formally, by the book. I will be sure to note here on the blog should I do so.
My fear is that the Big Bamboo switches to the long side, just in time for the next leg down. If it does, it won’t stay that way for long, but it would beÂ tough on the psychologyÂ to catch the wrong side of a move, twice in a row. Should that happen, the hypothetical 20 losses in a row may become a reality.
For now, the Big Bamboo is still looking short.
No New Entries for Wednesday