9/26/2020 Detailed analysis of my entire swing trading history. Only position I have left is MRO – I’m out of all other short-term positions (AAPL, XLF/SPY, FANG).

Hi everyone, I hope your weekend is off to a great start!

I started reading “Think & Trade like a Champion,” and have been inspired to keep more detailed statistics on my trades. I usually don’t like talking about the size of my trading account, but it will be necessary to highlight some of my findings.

The below screenshot of my excel spreadsheet highlights the key metrics I will be evaluating which is based on my ~2 years of trading.

I transferred the imported trade data from my broker (Charles Schwab), and manually entered each of my 175 trades including basic information like win/loss and percentage gain/loss on my account. I’m averaging about a 41% win rate with my wins nearly 4 times the size of my losses. Notice how although I put a hard stop loss at a 1% (rarely 2%) loss on my account, my average still comes out to well below that. This suggests that I’m cutting my losses before my stop loss is hit.

Lastly, I calculated my expectancy, which comes out to .67%. This means I should expect to gain .67% on average per trade that I take. In statistics or Poker, this “Expectancy” is equivalent to the Expected Value or E(X).

However, what’s interesting to note is that if we take out my Boeing trade (and PSEC trade) this year, the numbers look much worse. Since the Boeing trade was meant to be a longer multi-year hold, my position sizing was much larger.

Table below:

For reference, I made just over $28,000 on the Boeing trade, which was a 70% gain on my account value at the time (now my account is worth $120,000 because I transferred some money in). Also, note how my win to loss ratio is roughly 2.5 : 1 now instead of 4 : 1. Either way, the results are comforting because it seems like I’m trading properly (cutting losses without them getting too large).

Recently I’ve been feeling really bad when I lose 1% of my account on trades ($1,200). This can easily be explained by my average loss, which is only $231 (5 or 6 times less than I’m used to losing on average). However, as a percentage, it is still only slightly above my average loss, so I should start feeling more comfortable with the larger size trades. Perhaps a good adjustment would be to scale into my trades and risk less.

Lastly, I noticed at one point in February and March of 2018 that I had lost on 16 of 17 trades, which lead to a 10% – 15% drawdown on my account. The odds of this happening at my 40% win rate are nearly 1 in 4000, so it suggests that the market conditions changed. Taking a look at the chart of SPY in early 2018 suggests that perhaps my trading plan performs worse during sharp or rapid corrections.

This makes sense since I generally put in tighter stop losses in order to have a better risk/reward ratio. I’m still working on a fix for this, which is why I’ve exited all of my shorter term trades because the market is behaving similar to early 2018.

I exited my AAPL short position on Friday (and my XLF/SPY pairs trade) – weekly chart and analysis of AAPL below.

Because I think Apple has more downside potential than upside potential, I am cautious on the overall market. Although I think it’s more likely we move up early next week, the most likely scenario is we will be lower in 3-4 weeks because momentum is currently to the downside.

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