Thursday, July 31, 2008

Cleaning the Slate for August

This chart says a lot:

No, it's not yesterday's ES 5-min chart or the Boston fans' preference for trading Manny Ramirez ... it's my actual July daily equity curve. And if you've been following the blog, you'll see the performance in general lockstep with my daily comments.

Here's what stands out to me as I look back at July and prepare for August:

- Decent start, then the blunder of the year followed by rapid EESM recovery, one more strong push, and then consolidation.

- 18 profitable days; 5 draws

- 7 days with gains > $15K; 2 days with losses > $15K [$15K being my approximate benchmark for a decent or atrocious day]

- And back to point #1, a clear lackluster performance over the past week or so.

Conclusions? I see two. First, the EESM recovery mode clearly took its toll on my trading later in the month. The intense state of focus during that week of comeback activity was just that -- intense. You could have poured hot water on me on any day during that time and I probably wouldn't have noticed. Yet it was a necessary interval to address what happens to me once every year or two.

Second, I haven't adjusted enough to the late summer trading pace where volumes have been limited to dogpile in/out moves in the first and last 30 minutes of the session. Got another one to close today, this time to the downside ... 4 days and counting of extreme closing dogpiles. Oh, do I look forward to fall trading again!

What doesn't show in the chart is that about 1/3 of my net gains for the month came from the DAX ... which is an extremely high percentage for me. This also tells me that such trading in the early morning hours has taken its toll on my focus as the transition is made to the U.S. markets later in the day.

I share this info in part to remind myself and anyone looking over my shoulder that this business is so much more than simply chart patterns. Again, this is where market technicians and chatroom gurus leave people high and dry, but I digress. It's about the whole package. When I first look at my suboptimal results over the past week, and then I look at the chart patterns, I scratch my head big-time. Yet when considering at how the month has unfolded, the time of the year, etc., it comes into a very clear perspective.

If you look back at my posts or published writings over the years, you should notice that I talk more about my challenges than my successes. Even now, despite topping $100K in monthly earnings for the fifth time this year, I have to enter August with a renewed comeback mindset, as if I've once again just experienced a mind-numbing fall. The actual curve above shows consolidation over the past week. The key now is to mentally translate that consolidation to a serious drawdown -- and believe that it really happened that way.

Thus I begin August in a mental hole and have to start yet another comeback month. For the eighth time this year, I have to scrap and scrape to get back to even ground. I've just lost a significant portion of my capital, can feel my stomach tightening over the grotesqueness of the fall from grace, and must do everything in my power to start yet again. How could it happen? What must I do to prevent it? In other words, here's the mall map and directory:

If you're looking for pats on the back, don't look here. I haven't accomplished anything. Nothing. Nada. Zilch. We're always just one Hail Mary/Helmet catch away from ruining a year's worth of strong work in one fell swoop. The other team has just marched down the field and scored. Thankfully, we're not yet at the two-minute warning and there's time to come back. But not much.


Anonymous said...

Hey, this is a cool blog. I'll add it to my favorites.

e.e said...

Don could you tell me what charting software you are using to plot your equity curve... thanks

Don Miller said...

Welcome aboard. Let's have some fun with this.

Don Miller said...

Hi e.e.

The equity curve reflects a Microsoft Excel chart. I populated the Excel values via a download from Quicken, which contains my raw trading results which I enter in summary each day.