Reflecting on My First Quarter Performance

“Pain + Reflection = Progress”

That quote is from Ray Dalio, founder of Bridgewater Associates (the number one rated hedge fund in the world), and I believe it to be very true. So, here I go, and just like my usual yearly review, I’ll start off with a look at my basic stats for the quarter (Jan 1st. – Mar. 31st):

No. of Trade ideas: 13
Trades Triggered: 11
No. of Wins: 8
No. of Losses: 3
Trades not Triggered: 2
Win%: 72.7%
Average gain per winning trade: +0.424%
Average loss per losing trade: -0.47%
Net gain: +2.40%

Not a bad start to 2012 as I’m positive and doing well in relation to the rest of the industry. And by that, I mean I use the Currency Trader Index (+0.42% YTD) & Discretionary Traders Index (+0.09% YTD) at barclayhedge.com as my benchmark for performance. If I’m beating the average CTA, then I think I’m doing ok :)

I’m not going to talk about the major market themes for Q1 because my homegirl Happypip did a great job of that in her blog post, “Q1 2012 Review: Market Themes.” But I will say that these past three months saw much less volatility in news/events and shifts in sentiment/price action than in 2011. Going with the short-term themes and trends was much easier, probably a big reason for my improved performance. Overall, I think my analysis and opinions on sentiment and fundamentals are still pretty good, and I hope it will keep me in the right direction going forward.

I think one of my big weaknesses still tends to be not letting my winners run as evidenced by my average win vs. my average loss above. Also, one stat I don’t have up there is the types of exits I take; with the exception of one trade, I closed all of my positions manually. Another sign of not letting my ideas follow through.

I think psychologically, I’m still quick to cut trades quickly because of the 2011 experience where the market shifted almost daily on news events (aka “recency bias“) . That’s still true in this environment, but I could probably be a little less strict since it is more stable at the moment. Also, I could be more patient with my winners by waiting for the market to give me signals (candle formations, strong reaction to S&R levels, etc.) before closing a profitable trade.

Overall, I think adjusting to market changes has been, and will always be, a challenge. Focus and flexibility is the name of the game, but it’s something that must be delicately balanced with patience and discipline. I’d like to think that as each year passes I’m getting better in all of these aspects.

So for the second quarter, I’ll try to do a better job of sticking to my winners, and keep improving on my ability to stay patient and disciplined, but flexible.

That’s it for now! I hope you enjoyed my reflection on my trading performance, and I hope it serves as a good example for how you can approach your own periodic trading journal reviews. If you don’t have a trading journal, shame on you! Go punish yourself by doing 100 push-ups and then go create your own trading journal at MeetPips.com!

I’m a big believer in the power of journaling, so I’ll end this post with another piece of philosophy from Ray Dalio that I believe can be fully explored with journals.

“In short, I learned that being totally truthful, especially about mistakes and weaknesses, led to a rapid rate of improvement and movement toward what I wanted.”

Thanks for reading my blog and have a great weekend!

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