Monday, December 31, 2012

Shutting It Down for 2012

So the fiscal cliff is still out there, and the market remains completely at the whim of every single headline, rumor, or comment made by any of the idiots involved in this mess.  With one day of trading left in 2012, it's enough for me to take the day off and call it a year.   I tried to make some trades last week but really just spun my wheels, which has been a theme for the past few months.  Everytime my account made a little progress, I immediately gave it back.   Most of this was because I tried to let some trades turn into longer ones and did not immediately take profits of 1-2%.  My preferred method of trading is to let 5-10% gains develop while always cutting my losses, but at least for me, the market simply wasn't giving those types of trades out over the last few months.  I guess I should have adapted a little better and become more of a scalper.  

We'll see how 2013 develops - I am hoping it is a little more swing-trader friendly.  I will day-trade but much prefer a market where stocks don't breakout, immediately reverse after a day and give all of the breakout gains and more back, and then proceed higher after stopping people out.  I saw a ton of those types of charts this year, enough that I think I have become conditioned to simply sell into every breakout I see rather than holding them.  Historically, that is not the way to make big gains, but the market seems to be changing with algorithms and black boxes and Fed intervention and incompetent governments (well, that has been there for a while now) so as a trader, I have to adapt too. 

I didn't have a terrible 2012 stat-wise, finishing up about 27%.  I was hoping for much better however coming off of a 58% gain in 2011.   My win percentage was slightly better in 2012 that the previous year, but my average gain was over 2% lower than in 2011 (3.6% vs. 5.8%).  Maybe that's my trading.  Maybe it's the market.  It's probably a little of both but it's something I need to look at over the next few days as I look ahead to the new year and decide how I can improve my performance going into 2013.  I became much more of a day-trader this year and again, I have to look at whether that was my fault, the market's fault, or a combination of both.  Perhaps it was the right decision even though I didn't like doing it as much.   You can only take what the market gives you. 

Going forward, I honestly have no idea what happens with this fiscal cliff but I do know that trading a market that can crash or spike on every single tweet or news release coming out of D.C. is not a market that is trader-friendly, at least in my opinion. 

If you are under the opinion that a deal will be reached and you want to go long, you have two problems.  The first would be trusting all of the idiots in Washington to actually get something done.   That is always risky.  The second is the idea that everyone is expecting a spike if a deal is announced, so any deal that is reached could turn into a massive, "sell the news" event.   We are oversold here so that is good for the bulls but a super-strong bounce on news of a deal is not a given in my opinion.  The market might spike for a few hours, maybe even a day.  After that, who knows?

If you are under the opinion that a deal won't be reached and the market will sell off, you are simply taking the big risk that at any moment, some semblance of a deal will be announced and a massive spike (even if it is short-lived) will be sending you off the "cliff" as you are squeezed out of your short position.  Not fun to be on the wrong end of a short-squeeze. 

Some markets are simply not meant to be traded, and this one falls into that category.  Until this whole mess is finished, trading is going to be all over the place.   Too difficult if you ask me, and if you don't have some sort of small edge in this game, it's best to sit out.   I certainly do not see an edge here one way or the other. When things finally get settled one way or the other, I will be ready to jump back in, but not until then.  

My guess is that a temporary, "kick the can" type deal is agreed to at some point today and we are revisiting this mess in a few months.   If that happens, I probably won't be trading then as well.  My market score in negative at this point but if things improve and charts show up, I'll be ready as always.   Hopefully 2013 brings a strong, easier to trade market for all of us.   Best of luck to you and your families in the new year.   Take care.

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