Pulley had a great question on the last post about if my 67+% drawdown was after or previous to the financial blog reboot. The short answer to that is after, however, the longer answer is that I had a reboot followed by a method rework followed by a model overhaul.
The story goes I had taken on a couple of leveraged positions early on after the reboot, thinking I had a money making scheme figured out. I actually did a vid on the subject titled "I had a margin call" watch it here if you have seen it yet:
The irony of that event has to do with how much I espouse the benefits of risk management. Really, it doesn't make sense that I should talk so readily about a subject which in practice I know so little of. In practice, if I am willing to learn, I was given a demonstration that I had much more to understand on the subject. Hopefully I did learn this time around, but that will be something that time alone will tell. Clearly though, if I hope to do this job professionally, I need to really lock down my risk management.
There was another trade after the margin close out, but it was outside of the rules of my trade plan again, and it got stopped out, mercifully at less than 10% this time, however, the loss as it was outside of the trade plan rules offered to education or explanation. If I was within the trade model for the trade, I could figure out if it was an error in volatility management, or entry triggers, or number of units, but as it was from the hip, while the loss was within equity risk, there was nothing to learn from the experience, so a waste of time and a waste of money. However, can we ever say there is "nothing to learn from this"? If I were only able to take one thing away from that stop out after the margin call, it is the importance of me keeping within a rule structure so that adjustments can be efficient, accurate, and testable.
So as I sit and write this operating a new trade model confirming entry triggers with some favorable basis points, I know how I got there, and I can test if what I am trying has worked in the past.
Perhaps this can be the beginning of good things to come, but this is only the beginning, and I am only able to really share what is the veritable tip of an iceberg, and that iceberg is one that to this point, the processes that I am trying are still not my own. But the more I study the origins of these methodologies, the more I can continue to form my own and be able to adapt to an ever changing market where even proven models when not updated or modified quickly become obsolete.
