As I am writing this, the temperature outside the house has already gone past 36 degrees centigrade for the past several days. It is indeed hot, really hot, that my six-month old daughter does not anymore wear the usual sweater and pajama clothing even though the airconditioning is running at 19 degrees. Before summer took over, the airconditioning inside the room normally ran between 21 - 22 degrees and my daughter would be soundly sleeping, fully clothed from head to toe. This is no longer the case and staying alive in this oppressive summer heat is already a concern as I suffer from headaches and colds from sheer heat exhaustion.
There is one other thing that is giving me headaches these days - the stock market. Ever since that fateful day of August 5, 2011 when world stock markets crashed (see previous blog "The Year of Trading Dangerously"), my trading objective has been reduced to staying alive. This means not losing more than 15% of my investment capital in these turbulent times. My original objective of earning 60% ROI annually has to take a backseat. I have to pull myself back on the ground given the reality of the world that we are living in today no longer operates in the same parameters as before.
In order to stay alive, I started carefully analysing chart patterns and technical indicators on when stock prices move up and down and when trends reverse. When I started applying my so-called stock-selection methodology, I soon found out that the new methodology does not produce consistent results. I was beginning to question the usefulness of technical analysis and at the same time I was beginning to doubt my technical skills as losing trades piled up one after another.
In the month of September 2011, my accumulated losses racked up to a high of 11.4% of capital before settling down to 9.2% . In October, this went up to as high as 13.7% before going down to 7.7%. Then I started recovering my losses slowly in November going from 6.1% to 4.8%. But in December, I made trading mistakes as the market went sideways and my losses went up again from 5.3% at the beginning of the month to 9.0% at the end of month. It was frustrating to see my portfolio being sucked back into the mud. My mood was not celebratory in the season of hope. But hope did come in January 2012. With the announcement by the government to fasttrack several Public-Private Partnership Projects (PPP), the PSEi went wild up. I was ecstatic as I cut my losses from a high of 9.7% at the beginning of the month to only 1.8% at the end of the month. Then on February 8, 2012, my portfolio turned in a 0.06% profit for the first time since I started stock trading full time as a profession. It was a career-best high to date - paltry yet symbolic.
Turning my losses around and earning a profit for the first time gave me a false sense of invincibility. I aggressively bought three speculative stocks - CPG, CLOUD, and AAI in February. Then disaster struck as the prices of the three stocks nosedived. Believing that the dip was only temporary, I stubbornly held on to these securities even as they all lost value every single day thereafter. It hurt my pride and I was tossed in confusion. When I finally decided to sell them off, my losses were 7.14%, 16.93%, and 40.33% for CPG, CLOUD, and AAI respectively bringing back my losses to as high as 10.51% in March before cutting it down to 8.9%. For a moment I lost all confidence in trading that I did not trade for days. It was the same feeling as being involved in a car collision for the first time.
Then April came making summer really hot for all to care. But as hot as the summer is, so is the stock market which began breaking the ceiling again. Hope turned into ecstasy as 9 out 12 stocks turned green cutting losses from a high of 9.31% to a low of 4.29%. Thinking that the stock market would continue breaking higher grounds I decided not to realize any profits and allowed my stocks to continue running. But the market sharks sensed blood and made a killing turning my portfolio to lose value again. As the market closed today, April 30, 2012, my portfolio loss stands at 6.7%.
It has been almost eight months now since August 2011 and my portfolio has yet to rise above the zero line. Even if it has yet to achieve that, I am grateful that I was able to steer clear from real trouble. I have heard of investment funds worth billions running dry in the US and if that is any benchmark then I possibly have to congratulate myself for staying alive. The lessons learned from losing and not losing enough to be out of this market are more valuable than what I have learned in school, from the books, or websites combined. And for this, I can say that I have already won half the battle. As one of the great optimists around, I have to say this, "You ain't seen nothing yet. I have stayed alive all these chaotic months and I will start kicking soon."
