BarroMetrics Views: How to Defeat the Dreaded “Ebb” I
First off, thank you to all of those that sent in ‘get well’ wishes. I appreciate the thoughtfulness. Thank you.
Secondly, at last, flu free!
It was one of the strangest occurrences:
- Low temperature
- A truck load of congestion
- Runny nose, and
- Strangest of all double vision if I spent more than 30 -min or so reading, in front of the PC or TV.
Anyway, all cured now. I can turn to the emails that have accumulated over the past fortnight. If I owe you a reply, you should have it by week’s end, if not earlier. Turning to today’s blog….
It’s said it’s an ill wind that blows nobody any good. The forced sojourn gave me loads of time for reflection.
The interesting thing I noted is the pattern for the 2014 trading results is being replicated in 2015. ‘Flow’ in the last quarter and Jan, Feb experiencing ‘Ebb’. But whereas, Feb – Mar 2014, saw a -15% result, Feb 2015, saw a +.31%. The question I asked myself ‘why’ such a difference? What was I doing differently this year?
Before I turn to answering the question, let’s define “Flow” and “Ebb”.
When in “Flow”, I experience little stress in a trade (“I can’t do anything wrong”):
- The market moves into my ideal entry zone, and provides the needed ‘trigger’.
- The open loss after entry stays within my Maximum Adverse Excursion.
- The trade allows me to exit my open position’s first-third fairly quickly,
- Most trades see a second-third profit target.
- A majority of trades, see the last-third target.
- Stop outs, if they happen at all, are few and far between.
“Ebb” is the reverse (“I can’t do anything right”).
- Entry into my zone is filled with ‘fakeouts’
- Triggers are less clear-cut.
- After entry, I see open losses that are greater than my Maximum Adverse Excursion.
- A minority of trades reach the first-third target.
- Few if any reach the second-third target.
- Stop outs are common.
What this means is when in ‘Ebb’, I experience full losses i.e. the majority of my trades suffer 1% to 2% losses, and I don’t make enough in the profitable trades to compensate for these. That being the case, how did I manage to stay in the black in Feb this year?
The answer tomorrow……