January 27

[TerryDunne]

My paranoia re shorting has been fueled by January 27.

I spent days of research time trying to find a way of missing that day – or at least stocks like FOSL before finally helicoptering up and realising that I’ve been wasting my time, either curve fitting or destroying the return that my short systems generate.

Which still leaves me trying to process 27 January…I wonder whether comparison to the ‘Flash Crash’ is appropriate here. It was very painful for me as I ran intra day stops at the time. However, it hasn’t happened again.

Is it reasonable to operate under the assumption that 27 January was similar, or am I kidding myself?

For people who were short then, were you able to avoid stocks like FOSL? If not, how have you processed all of that, both psychologically and system wise?

Best wishes,

Terry

[Nick Radge]

I took a hit on Jan 27, but two things stand out:

(1) I had my second largest positive day just 3 days prior
(2) I look at this scenario as I do with ‘explainable’ drawdowns.

As is always said, your worst drawdown is always ahead of you. There will be some black swan that gives you a slap across the face. Some in this forum felt that in March last year. Several had drawdowns well beyond their tested metrics.

However, it is explainable. In other words its not a system design fault. In theory, if that is the case, then once that ‘event’ has run its course, the system should return to its normal return profile.

The fact that you have now gone through the experience, it would be silly to stop trading the system because for all intents it will get back to normal.

Can you avoid these in the future? Probably not. The meme stocks has been something never experienced before, but now it’s a known known, its unlikely to have a huge impact as its done in the last few weeks. Also consider the idiots taking part lost a huge proportion of their money and that exchanges/brokers/regulator have stepped in to curb it happening again – at least in the format we’ve witnessed.

#next1000trades

Nick

[TerryDunne]

Hi Nick,

‘Explainable’ is a great way of looking at it! Well, at least it lets me keep trading…

And your point about being a known known makes really good sense.

So I just need to keep trundling, acknowledging that what we are doing is not risk free.

Thanks,

Terry

[MichaelRodwell]

Thanks Terry and Nick.

Yep, March punched me in the face. But I’m still here and tracking along nicely. I’m sure it wont be the last time I get smacked in the face but it was a valuable smacking in the face.

[TerryDunne]

Good on you Michael!

Your experiences make me think of that Mike Tyson (well known trading philosopher) quote

“Everyone has a plan until they get punched in the mouth”

It sounds as if you’ve been punched in the mouth, but you’re still standing!

It’s happened to me as well, which is why I focus on defence.

[AlexanderLuong]

I totally get you on the short paranoia lol. I started shorting last year and it was really painful for a while. It felt like I would get lucky and make money for a few days then just take a hit on some moon stock and instantly lose it all. I was thinking of switching back to long-only, but the uncorrelation effect of MR MOC Long + Short is just too smooth to pass up. It led to me just exaggerating everything in my short system for 2021. I doubled the stretch, increased all the indicator thresholds, and got the maxDD down to half of what I thought I could tolerate on longs lol. Made sure that maxDD is in the low-mid single digits for shorts…

It’s been doing much better ever since and I’m having a great year on shorts so far. Jan 27 was a good winning day for me. FOSL passed my conditions, but seems to have fell out of my top 40 ranking criteria. In fact, it didn’t even show up in the csv at all. So my ranking helped me dodge at least that bullet that day. FIZZ on the other hand…

Try introducing distance above BBandTop to your ranking somehow. I do that because I try to be conservative and short things that are way overextended. FOSL just barely closed above it on Jan 26, whereas everything I shorted was already far above it.

But the thing that hit me the most YTD was the day I shorted SAVA on the open around $30 and it closed above $60 lol. That one stung a bit, but I sucked it up and ended up recovering the loss in just 2 days.

[TerryDunne]

Ouch, Alexander! You’ve done well to keep your sang froid.

There were a lot of stocks at that time, as well as FOSL and FIZZ, but I think(hope) it might have been a unique event.

I’ve decided to just keep trucking on the shorts, with some trepidation…you give me hope

[JulianCohen]

Alexander Luong wrote:

Try introducing distance above BBandTop to your ranking somehow.

That’s a nice idea….Here goes another few days in front of the computer

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