I Literally Called a Market Top

Posted on May 6 2015 - 6:19am by Sharpe Trade

It’s starting to be a rough year for ol’ Dan.

I am undergoing the worst draw-down I’ve experienced in years.

I’m not whining … because I hate whining.  Draw-down I can re-cover from, and is a fact of life.  It is also immaterial in the long run.  If you make 35%, and then lose 9% … well then …

I have another point to make here. 

When I say “I literally called a market top“, I’m not bragging.  I’m not trying to lay claim to prognostications wherein I expertly predicted what any particular market would do. In fact, quite the opposite.  What I’m saying, is that I “went retail“.  In other words, I said exactly the wrong thing, at exactly the wrong time. I made a statement that it would be a good idea to be “Long the U.S. Dollar“.  But look at the date of that article.

It is literally the day of the top in the U.S. Dollar.

U.S. Dollar Daily Chart (tradingview.com)

05_06_15_DXM2015 US Dollar Chart

Now to be fair … the point of the article was that one should ride trends for as long as they last.  I also said that the strong U.S. Dollar would not last forever, and there would come to be a time when it would be time to adjust one’s stance.  And I have not been taking any long’s in the U.S. Dollar for at least four weeks.

But I can’t take my eye’s off the date of that article.  I mean … dear lord … I was bullish on March 11th.

There are a couple of lessons here.

All traders enter time periods wherein they just are ‘out of synch’.  And let me tell you, I’m out of synch at the moment.  I haven’t looked at the numbers today, but I think I have draw-down of near abouts’ 9%.  Now some may say that is more than acceptable for any professional, but for me … that is gargantuan.  I strive for more than what is ‘acceptable’.  

Regardless … there are times we are simply ‘out of synch’.  

First … one should understand and accept that truth.  There are time periods where you can’t seem to find your ‘battle rhythm’.  You’re not executing as you should, when you should.  Honestly admit it.  Because if you lie to yourself, the market will find you out … and destroy you.  It will exploit your inability to see reality.  It is a natural law of the universe.   It’s best to honestly recognize such times.  If you refuse to do so … well … that is how acceptable 9% draw-down quickly devolves into your account blowing up in front of your face.

Second?  I would say that one should keep a journal.  Myself, I have a beautiful website here that records my thoughts.  Many do not have such a resource.  But whatever it is … keep a trading journal.  Record what you are thinking about specific markets, at specific times.   But that will do you no good if you do not schedule time to review your journal, and see how your previous thoughts have lined up with what has actually occured.

We call this ‘reality testing’.

Do not ignore what your journal is saying to you.  Because your trade journal will not lie to you.  It will tell you when you are doing well.  But it will also tell you that you thought it was a great idea to ‘be long the U.S. Dollar’ on March 11, 2015.   When your own psyche was simply ‘too bullish’ on any particular market.   It may be painful … but your journal is trying to help you to see the truth, and avoid getting run over by the market …

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