Still in cash :-)

[MichaelRodwell]

Hey Guys,

I thought I would stop by for a little bit of therapy.

As the markets continue to sell off I find myself in a relatively good mental state. My monthly system stayed long into March so I have worn the whole move from the market top to where we are today (lol – futures currently limit up!). It’s bizarre to look at the charts and see how vicious and sudden the down move has been.

Looking at my account has been a little nauseating. But today was the first time I checked in for over a week.

I’ve considered overriding my systems twice – Once, close to ATH’s when the TSLA mania was happening and then a week or so ago after the pain of the loss started to increase. In the short run both of these would have been good decisions – in the long run, well, may be not – hard to say. I probably would have though I had become a messiah and went on to make a multitude of stupid decisions post that.

My processing of the situation is normalising now though. Just think, every 10% fall is a 10% of a smaller number!

As bad as it’s been I do think I will survive this and be better for following my system. Once the dust settles I’ll start thinking about some measures to put in place to protect a bit further but for now, I’m stay detached from the money and watching it unfold.

I wish I had some cash sitting on the sidelines ready to go!

In other new, you win some you lose some… my ASX system that launched this month is sitting at 0.0% return on the sidelines!

Good luck everyone – stay safe and healthy!

[GlenPeake]

Hey Mike,

Just a quick reply…. that way you know someone is reading your post(s)……

We’ve all thought about overriding our systems etc….. but Well Done so far. No-one knows what will happen….

I think most of us have had ‘light bulb’ moments in terms of adding ‘kill switches’ / ‘circuit breakers’ to our systems etc…. We have some ‘very recent and fresh data’ to explore further on that subject…..

Coming out of this (and Nick still says this to the day)…. he still has people coming up to him and saying they cannot trade since the GFC, their scars won’t allow them to pull the trigger etc….. so when all this dust settles and things settle down, you’ll be able to just pull the trigger…… etc

Stay healthy buddy.

[JulianCohen]

I’ve been thinking of you Mike as I knew your Index filter allowed you to stay in, but I was waiting to hear from you first.

[MichaelRodwell]

Thanks Julian!

If we see some typical gyrations at this point it will probably play out OK.

I didnt back test 1987 but going back and looking at the very fast and steep drop it actually does ok at getting back in the market. It’s funny how the chips fall… sometimes the 200MA works great, other times not…

I’ve been surprised to see the fall come so quickly but it’s good to work through this and have the experience now with a pretty long time horizon ahead.

Will be reporting March results (gulp) as per usual.

As a side note… in and around the tech bubble I had two months in a row go -11% and -17% and finished the year 20+% so while it sucks to experience this situation, ultimately the system is doing what I asked it to do.

[JulianCohen]

Your head is in the right place at least…or you’re making a good show of it

[MichaelRodwell]

Ahhahhaha… my worst day is behind me (I think).

[Nick Radge]

Quote:

I think most of us have had ‘light bulb’ moments in terms of adding ‘kill switches’ / ‘circuit breakers’ to our systems etc…. We have some ‘very recent and fresh data’ to explore further on that subject…..

I’ll add two things here:

(1) Don’t isolate (should I even use that word?) this incident with recency bias. Step back, test any new theory over the longer term and make sure it’s not detracting from the end goal.

Example: I have had two clients suggest I make changes to two of my strategies. The changes appear logical with what has occurred, but when put to the test over the longer term, both detract results immensely.

(2) Use this ‘off’ period to research more ideas/strategies etc. It was during the GFC where I first started tinkering with mean reversion systems – I had time and I needed to put the money to work where I could.

Next 1000 trades!

[MichaelRodwell]

I made the decision to override my system and go to cash.

Survival was my key objective. I need to pick through debris but I would say my intra-month drawdown is about 35%. I’ve never really paid attention to intra month results that closely but with a market running this fast I felt pretty glued to the screens.

I’ll report my end of month results in time but I don’t think they will be that extraordinary.

After a chat with Nick I came to the realisation that there are many external factors coming into my decision making. Namely this is my first financial crisis as a sole provider, looking after parents and w two young kids.

My trading system in isolation was fine and losses tolerable but at this specific time, I felt certainty, security and survival were more important.

2 things I’m grateful for:

1. I’m financially intact – relative strength of my stocks was good in the NDX and I was in cash for the ASX

2. Psychologically I’m still in the game and feel good about getting back into the market at the right time

Finally, I don’t think this will result in discretion creep for my trading. This is a truely unique time and know when we have more stability in the future trading will be boring again (yay!)

Good luck and good trading!

[ScottMcNab]

Bit of code might be interested in playing with Mike..idea is to check the rotation system over the weekend…when it hits the fan the rotation system then switches down to a weekly rotation..the idea being a chance to exit the market sooner if no longer passes filters for index or individual stock….then back up to monthly when market calms down. It is nearly always in EOM mode in backtests so sample size is pretty dubious. I am not currently using this in my system as it knocked a couple of % off cagr (in fact it made almost every metric look slightly worse) but I am revisiting it as a potential “necessary evil” to keep me in the game long term…..was pure luck I think that my index filter activated on the last day in Feb…surely room for improvement of this idea/code too.

IndexFail = NOT IndexPass or IndexVolaHigh;
Risky = BarsSince(IndexFail)<5;
FirstDayofWeek = DayOfWeek() TradeDay = (FirstDayofWeek AND Risky) OR EOM;
PositionScore = IIf(Year()>=1955 AND TradeDay,score,scoreNoRotate);

[MichaelRodwell]

Awesome, thanks Scott.

Still licking my wounds but will definitely look into this.

[Stephen James]

Make sure you do some thorough research if using BarsSince. I recently discovered it doing some odd things with chart signals.

An alternative could be the Sum function:-
Risky = Sum(Indexfail,5)==0

[ScottMcNab]

Risky = Sum(Indexfail,5)>0 ?

[Stephen James]

Sorry, I should have started with E.g. so yes, adjust to whatever suits your rule.

Sum in that context returns the number of times a condition occurs in the lookback period.

[TimothyStrickland]

Thanks for posting Michael. Luckily I missed most of the downturn but like you, I did some soul searching as well. Still evaluating new strategies to see how I will proceed. Let’s just get to the other side of this, for now, survival and being able to pull the trigger when this is over is more important.

[MichaelRodwell]

Thanks Tim.

All hands on deck to see this through. Will probably need a little bit of luck but will live to fight another day.

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