It is not thinking that makes big money in stock market

It has been over two months since I last wrote about my trading. Tho I’ve been reading good books and reviewing them here in my blog, I will now give a quick overview how I’ve been actually doing in the stock market during the past couple of months.

“It never was my thinking that made the big money for me. It always was my sitting.” (Jesse Livermore)

I’ve been long in the market and a number of (mostly tech) stocks since late March. Lots of predictions and opinions going around in media what should happen next, the stock market being out of reality, not in touch with the economy, horrific Corona statistics etc. Should one be following all that or just the price of an asset?!

I also had couple of shorts as hedges for a possible market downturn recently that lost money. The market was strong, support held and no more supply came in during the pullbacks, therefore I was stopped out of the shorts pretty quickly. No regrets, it could have gone the other way. I will be showing these short trades soon in a separate blog post with a key lesson. But moving on with what’s happening right now.

Overall, my account is nicely up thanks to longs overweighting in my portfolio. Right now I have 18 long positions open since April, no shorts at the time of writing. 14 of them are in profit, the best performer up over 110%, few over 30%. 4 positions are slightly negative. To be honest, I don’t even know half of the companies or what they do… Yes, I have been slowly turning into a quant trader.. 🙂

Let me share my current view on the US stock market. Several weeks ago I was anticipating for a “dead cat bounce” (temporary upswing followed by a stronger decline), but then it changed to a “new mid-term uptrend” for me. Well, how long is the mid-term? Based on my historical backtest on the $SPX since 1980, the shortest uptrend in such situation has been ~40 trading days (2007) and the longest uptrend ~900 trading days (1995 – 98). The average has been ~300 trading days, a bit more than a year. In general, such uptrends have become shorter during the past couple of decades. This is not a prediction nor a buying recommendation. It could become another short period in the data. At some point the market will turn down, either to a deeper pullback or a trend reverse, but it will happen. I will be taking short trades if my trading system tells me to. It’s not about intuitive thinking what could happen next.

In summary, during the past couple of months I’ve been doing less for more. I’ve been waiting for my ideas to either work out or prove me wrong. No matter what the media says or the analysts predict. Just reacting in the moment of now. Keeping my winners and cutting losers. That’s been my key theme throughout the ‘rona crisis.

Lesson Learned: It is not thinking that makes big money in the stock market, it is sitting.

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