Q1 2020 Performance Report

Markets over the last 3 months have been eventful to put things lightly. The market has offered up high levels of volatility and over the course of the period sizeable moves in both directions. My performance for the quarter wasn’t quite what I would have liked it to be but what it has provided me is more knowledge to bank and some things to think about going forward.

As someone who has been trading not quite 5 years and had a growing balance over that period starting from fairly low capital, Q4 2018 was the first real downturn that I had been forced to contend with in my time in the market. And to be blunt I didn’t do well. However that lesson stayed with me in the back of my mind and has helped when Q1 2020 rolled around. As I mentioned already the quarter was far from perfect for me but it was also much better than Q4 2018 and that is something I will take heart from and aim to better again the next iteration of a downside event.

I started the quarter pretty conservative from the outset. I carried as much as 40-50% cash through most of the first 6 weeks of the quarter. This meant that I was lagging the XJO for that first 6 weeks as the market shot out of the blocks quite hard for the year, quite irrationally, which is now obvious in hindsight. The benefit of this conservative positioning was that it made it easy to pivot when things started to go pear shaped.

I sold a lot of my remaining positions in late Feb as I could see things were going to go wrong. My biggest mistake was holding onto a few core positions as they inevitably took hits along with the rest of the market. The wise choice would have been to go 100% cash in retrospect. Act first, ask questions second.

In saying that my performance was as follows:

MonthJan FebMar
Performance3.37%-0.48%-9.84%
Total Return-7.34%

I ran a poll this week to see what other people use as a benchmark for their performance and got some useful feedback from a number of sources. So upon thinking about it I am going to use XJOA (ASX 200 Accumulation Index) + 10%. The 10% is to represent the premium I think I need to justify my time and mental capital. Going forward I will apportion this evenly as 2.5% per quarter.

Total Return-7.34%
ASX200 TR +2.5%-20.60%
Variance13.26%

Overall whilst not entirely happy with my performance there are some positives to take out of it and also some lessons.

I have learnt over the last 6 weeks that intraday trading is not my thing. 1.5-2.0% of my loss can be attributed to me trying to intraday trade. I am sure if I stuck to it that I could learn and improve but given it’s not where I intend to focus my energy moving forward I would probably have been better off not bothering. One of the advantages of being a part time trader is that realistically I don’t have to push myself into different styles, I can afford to wait until conditions return to something that suits my style.

So this is another lesson. It is ok to do nothing. This is something that I find very hard to do and learning patience is something that I am working hard to improve.

Instead I am going to try and use my time to examine past trades (or trades I didn’t take that met my criteria). I need to improve my position sizing going forward to put larger size into A setups in particular. Often I don’t go hard enough at my best trades and as such they don’t have the influence on my portfolio that they should

The other thing that I want to improve is letting my winners ride. I have a tendency to sell early, so working on a more mechanised process to define sell points. I feel as if I can nail these two changes in particularly I can significantly improve my performance going froward.

With all that considered I have been a net seller so far in April and am positioned approx 85% cash and just a few remaining positions. I am comfortable with this for now and trying not to have a strong bias either way on the direction of this market. Primarily (as ironic as it seems) I am looking for a decrease in volatility before deploying much more cash.

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