After the Google fiasco on Thursday, the entire US market seemed to take a dive on Friday. As a result, a few of my strongest positions reduced in value.
Fortunately, I was able to finish the day without seeing my equity value fall too far below the past few days’ values. The cautionary tale in this story though is about hope and fear, and how you should hope for values to increase and fear to lose more money.
For the last week, this mantra has helped me keep positions open to try and ride out the positive trend for as long as it goes – ie.let my winners run
But yesterday, I have to say that for the first time in a few weeks, my discplined approach was being shaken.
As I sit here today, I’m looking at a portfolio reduction of about 26% from Thursday’s close, and I find myself HOPING that things will turn around next week instead of FEARING that I’ll lose more money.
I’m honestly caught in two minds between:
- Closing all my positions first thing on Monday and then sitting on the cash until the crazinness subsides (I don’t want to lose any more value).
- Sticking to my rules and just letting my positions ride it out.
There’s an interesting consideration here in that theoretically/scientifically, if I’ve picked the positions on sound priniciples and traded with longterm trend then things should play out as planned and all positions should have enough room in them to ride out any declines in value until things pick up again BUT, as we all know; the market is a herding beast made up of animal spirit and friday’s US decline looks to be an indication of a sudden drop in confidence.
Is it an indication of a fearful market?
As one of my readers put it yesterday, is now the time to be looking at RISK-OFF positions?
Certainly I think it could be a week or so to have a few shorts in play – unfortunately I don’t have any open right now.
Tough one, and a fine example of how trading psychology can influence your trading.
Should I cash in or hang in?