Stats given cover closed trades for the 8th October - 14th October
My total realized profit from the past week is -3.72% Overall the portfolio is down 9.25%
Profitable trades closed: 8
Unprofitable trades closed: 15
Most traded instrument: $SQ / $NSDQ100 (5 Trades)
Ultimately this week has been a lesson in over extension during trading. I had funds aside for if a dip occurred, as usual, but it was a bit low at around 5%. I began buying the dip when the Nasdaq was down to 7300, expecting a rebound off support and the 200MA on the 4h chart. When it smashed below it down to 7000 I was left without enough funds to support my 2x leveraged positions which were approaching their 50% SL’s, nor the ability to buy the dip and take advantage of the move. There really is no excuse for this, since January I have been aware that these corrections could occur, even a major market bear move. I talked over the past few weeks about adjusting my weighting for asset types, and in that I must include my available balance for defensive trading. Until now I have operated on a 2-10% level, but I now believe a 10-15% level of available funds is safer moving forward. I realise that hearing me admit that my strategy was ill-prepared for this is not very reassuring, but my goal on these updates is always to be honest, and the truth is that I was not as prepared as I should have been. With that being said, I remain optimistic about the stock market, earnings kicks off this week with some big names such as $IBM and $NFLX, if these go well it could set the tone for a move back up
News
The big news of the week is of course the decline in stock markets, led by China and the US. In China many companies hit a 52 week low. The fear in the market even lead China to declare some companies of national importance, effectively “too big to fail”. Over in the US it was interest rates that acted as the catalyst for the correction. For several years most traders and investors including myself and eToro’s own Mati Greenspan have warned of an impending major correct. Yet today as the dust settles, it appears this might not be it. Some stocks were down over 25%, but overall the indices avoided dropping more than 10%. A dead cat bounce is possible, this could just be the start. I believe the upcoming earnings period will be the deciding factor
The big news in Crypto this week is all about Tether. USDT or Tether as it’s more commonly known was the first USD pegged crypto, surviving the previous major bear market, it’s been around a long time now. Most of that time it has come under heavy criticism for the lack of transparency. Although when it was first created there were promises of regular quarterly audits for the funds backing the token, there has been almost no attempt to ever carry one out. A few times previously it has looked like everything was about to collapse, with it trading below $0.90, 10% out from what it is supposed to be. Tether is supposed to be a Stablecoin, it is now used on most major exchanges. Starting life at Bitfinex, it is now used on Binance, BitTrex and several other top exchanges. Recently though there has been new competition with some exchanges choosing to build their own, some major hedge fund and fintech companies working on their own, and even projects such as Stellar and EOS planning their own stablecoins. This time the drop in price appears to be surrounding rumours of the banking partner hitting financial difficulties. Personally I’ve steered clear of USDT for a long time as the lack of transparency troubles me, but the impact it could have on the market is substantial. I and many other traders carefully watch for when new USDT is created as a signal for new buying pressure coming to the market. A “run on the banks” style event on USDT could see a huge spike in Bitcoin and other major cryptos, this is what unfolded earlier today, with a $500 premium on Bitcoin where it is paired with USDT rather than directly with USD. The fact that the arbitrage opportunity has not yet been jumped on some 10 hours later does not bode well in my opinion. Although we could see a pump in cryptos as people flee the stablecoin, I suspect it would be quickly followed by a dump as these people seek alternatives, perhaps real USD? Not to mention the chaos it could cause for exchanges. I’ll be monitoring the situation. If you’d like a slightly longer view I did write a post earlier today about this specifically
Cryptos
$EOS
4 trades. Losses of -5.4%, -12.4%, and -21.3%. One profit of 3.2%. Although many of these were closed at a loss, most were closed in the high $5 area, a good 10% above the current price, allowing a cheaper buy-back at lower prices
$BTC
2 trades. -27.8% & -64.5%. The largest being a realised loss from the previous December. Some tough decisions, but after seeing the price fail to break through on the 10th of October it appeared clear to me that further damage control was likely required. Even at the time of writing this, with Bitcoin breaking out of the downtrend on many charts I remain skeptical given the Tether situation, a drop below 6k is plausible
Stocks $MSFT
-3% on one position closed for damage control
$TWTR
1 trade at -23%. Twitter dropped less than many other stocks, I figured I’d switch it for positions in stocks with more upside
$INTC
1 short of 2.7% profit. After a failed short last week due to Intel releasing news of supply chain fixes, this week I figured I’d try again while the market was bearish
$ETSY
2 positions closed at -39% and -41.8%. These are the two trades I regret most from the week. I felt the need to make some cash available to short elsewhere in the market and chose ETSY as the sacrifice
$NSDQ100
5 shorts. Losses of -1.6%, and -0.007%. Profits of 1.2%, 1%, and 1%. One bad short, one stop loss that unfortunately hit in a small loss and 3 reasonable day trades. This is what the ETSY funds were used on, along with the Intel and Snapchat shorts
$SQ
5 trades. Losses of -52.3%, -51.2%, -50.2%, -49.8%, and a profit of 1.7%.
Unfortunately Square was one of the worst hit stocks by the recent correction. All but one of these positions were closed by SL’s. I was trying to adjust SL’s across positions to ensure none hit, but unfortunately failed, I have since re-opened most of these positions
$AMD
1 trade. 0.9% profit. Not much of a consolation given the horrible results this week
$SNAP
1 short. 1% profit, Snapchat really is a company in trouble, one of the biggest losers during this bear move, I caught a bounce. I’m uneasy about shorting it further simply because I believe the company is heading into a position of being an attractive purchase by a larger competitor, and when rumours of this eventually start circulating it could see volatile price jumps due to speculation
Looking Forward
Netflix kicks off earnings season tomorrow post-market. Lot of suggestions that they’ll have a good earnings, although the current economic and political environment with rising interest rates and questions of stability could be a cause for concern
I am also attending an event with Finimize in London tomorrow. Finimize is a cool fintech company who send out daily news digests for everything finance, short and to the point. I’ve been using it for a few weeks now. The waiting list is already pretty substantial so I won’t recommend anyone showing up, the panel I’m on is broadly talking about investing as a whole
Comments and questions are welcome!