August is coming to an end, and after a great July, August has been a month of a slow death by a thousand cuts. The account is down -24% for the month. Hardly any of my trades were winners. I stuck to my system on most trades, but did make errors on some. The slow markets are very frustrating and sometimes lead to impatient trades, which in hind-sight were not right. But mainly, the results reflect the fact that my trading style is not suited for range-bound markets. The ranges this month have been incredibly small by comparison with other months over the past few years. I hope markets don’t become like this permanently!
I have 2 options for dealing with such markets: a) Develop another system for ranging markets, or b) Just don’t trade.
Developing another system has 2 big drawbacks:
1. It is hard for one person to have two contrasting trading styles simultaneously. In fact I don’t think it is possible. Every decision-point will have two or more possible answers, and that is a recipe for disaster.
2. The other issue is how to know when to use a particular system. Range markets can be labelled as such only after a little time has passed and even that is uncertain – how long should one wait? By the time it becomes obvious that we are in a ranging market we may be close to a break-out.
To be clear, there are some clues that point to a ranging market. For example, after a significant move in either direction, one can be sure that the market will range and consolidate for a while. So we could switch to a range-market strategy immediately after a big move. Once the range is decisively broken, we have a trend. There are still many questions that need answering and I will have to do more research.
Until then, option (b) is preferable. Just don’t trade in August or similar periods!
August has been a little unsettling for me – I have felt out of sync all month. The detailed results for the month are in the next post.