Staying solvent in 2023

SP:SPX   S&P 500 Index
You know the saying. The market can stay erratic longer than you can stay solvent. So I figured, since I am god awful at tracking my trades and journaling anymore, it was time to reflect on some things that have changed for me this year. As a trader for roughly 6 years now, I generally go through growing pains each year at the start.

Every year the market adapts a new “sentiment” and a new style and its always a little different to adjust, regardless of how objective your approach is.
This year was no different. My average win rate for both day trades and swings fell on average 25 to 30% in January. This is something that is normal for me (an initial losing streak in the new year) but the fall was actually the most dramatic I have seen in the past couple of years. However, I have now successfully brought my win rate back to 2022 levels and am actually pushing at a slight improvement.

So what has changed? Well, as always, my approach to the market has changed. Here are some rules and adaptations I have changed/made to improve my trading in 2023:

1. Stopped trading narratives. If you read my ideas, you will probably have experienced this. No longer do I advocate publicly a short bias or long bias unless that is what the probabilities assert. I don’t claim the market has bottomed or that it is topped. I don’t claim that this is a bear market rally or that this is expected market behaviour. I just operate within the confines of what the market is doing. For 2022, I operated on “Everything is horrible, the world is ending, the market is going to -5$, scream and panic and short EVERYTHING” and, you know, that worked at the time. But it definitely doesn’t work anymore. My abandoning my narratives and my attempts to impose my own bias narrative on the market has actually gravely helped me. I avoid short positions when the probability tells me to and avoid long positions when the probability tells me to. Before, I avoided long positions like the plague and was shorting even when the probabilities said to long. I was just generally petrified of anything that involved bullishness because of my innate narrative of “The world is ending”. Now, I just don’t care and follow the narrative of the probability and analysis. And that is a fine enough narrative for the time being.

2. Stopped reading news. I mean, if you are a trader, you probably know how bad the news is. But yeah, I stopped actually reading mainstream media (MSM) and just paid attention to actual fundamental data releases. CPI, PCE, Bond and Yield curves, I read the raw results and then Investopedia and Google Scholar the complex interplay of these things on the market. I no longer resort to some analyst’s opinion of how these will impact the market. I read and make attempts at understanding it on my own and drawing my own conclusion of what this would mean. Trading news instills trading narratives. MSM is anything but unbiased. Even if you don’t think its influencing your thinking, its influencing your thinking. Just ask someone’s view on something who watches FOX vs CNN vs MSNBC vs PBS. I am sure all 4 people will have a different impression of the same event based on where they read it ;).

3. Being comfortable being red. The market hands down is whipsaw central. We bounce back and fourth between percentile ranges and supports like its 1980s Atari pong. One of the things that have helped me stress less is just accepting that, if I plan to day trade a position or swing it, its probably going to go red and that’s okay. Perfect entries are not as easily achievable now and its fine. Patience, discipline and risk management are the keys.

4. Position sizing down: This goes hand in hand with point 3. This isn’t really the market to get overly greedy. There is a lot of uncertainty here fundamentally and just visibly in the price action we see. As such, I have had to accept that long gone are the days where I could comfortably buy 250 to 500 weekly option contracts and just let ‘em ride. That time will come back eventually and it will be fine. But unfortunately now is not the time for it.

5. Diversifying my strategies: This year I have actually begun trying other things that tend to be more risk averse. This includes selling options instead of buying options or shares and planning trades that monopolize on the idea of investments (i.e. selling puts at entry prices and on stocks that I wouldn’t mind owning in my longer term portfolio). At the end of the day, trading is about growing wealth. Monopolizing on a bad trade in a way that provides you with some gain (you may have lost some money, but now you own an asset and equity that you can gain interest on by selling options against and just owning) is important. While some people continue to be very risk averse, liquidating 401Ks and living by the narrative that the world is going into nuclear war, the ones who said “F it!” and bought NVDA, AMD, BA, AAPL and or MSFT are begging to differ.

Remember, we can’t all be right all the time. We can’t all be wrong all the time. But, we can learn from our mistakes and pave the way for moving forward. Trading, as with any career, profession or discipline, requires continuing learning, education and ability to adapt and adjust. While I am one for nostalgia (flashback, my 80s and 90s themed posts), unfortunately the market has moved on and so should we. So I say to everyone including myself the same that I said to my friend in high school who insisted on wearing shoulder pads, its NOT the 2022s anymore. ;)

Safe trades everyone!


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