Reflections on Q1 2023 Trading
In Q1 2023 I made +57.88% returns. This is on a capital base in the low six digits. The bad part is that at one point about 3 weeks prior to end of the quarter I was actually up +87%. But I was also down -18% right at the beginning of the year from which I recovered.
My bad trades have happened every time I have not stuck with my model. These are the times I have fallen prey to fear or greed. My model is my “edge”, and my success is completely dependent on my discipline to stick to my edge.
The fear and greed are mostly created through external sources. Primarily these are created through listening to experts on TV. I watch financial TV for entertainment and not to take advice or guidance. I have to remember that or maybe stop watching TV.
However, I do not blame anyone else or any external sources for the bad trades I make. They are my trades and I own them whether they turn out to be good or bad. Thankfully, I have had more good ones than bad and hence the returns.
Last year I used to overtrade a lot and on a lower capital. This year I have got better at it. There is a point at which I stop. I expect to get better and better at that.
All the negatives aside, I was able to validate (again) that my model works. And, for the most part, I followed the model. Some of my model rules are:
Do not trade individual stocks. I have no way to know what is going to happen. So, I have no way of managing risk.
Trade ETFs that have high volumes and use leverage through options trades.
Trade with the trend. I analyze trend on a weekly (and for major markets more frequently) basis and post my analysis here.
Someday I will write a book with more details about it.
I firmly believe that one can get bogged down or even blind-sided by listening to experts and reading the media. At the turn of the year, the expectations were that markets would fall, and we would head into a recession. Instead, January turned out to be an up month.
We have literally had a seesaw in the markets with January up, then February down and then March up again. So, does that mean April will be up again. I do not know, and I do not forecast although I have read that April is usually an up month.
My approach is to follow the trend and trade accordingly. I have learned that in order to be successful in the markets one does not need to forecast. I look at price movements and take advantage of trends small and big.
It is important to state that I look at trading in the markets as a source of income. An outcome of generating income (in excess of one’s expenses) is a way to build wealth of course. So, eventually I expect to build wealth. But the primary objective is income.
What is in store for Q2? I do not know. As I mentioned above, I read and heard that April is usually a good month. Then in May, one is supposed to sell and go away. That is what I hear and read. As for me, I will continue to follow my model and execute on it.