The first part of my year-end review is an assessment of my performance over the past year. The actual return for 2011 was about 25%, which isn't horrible, but very low for the amount of risk I have taken.
I've decided to quantify a theme I have written about before to understand the actual impact that stupidity plays on my trading. My losses fall in to 5 main categories: errors in timing/direction; gambling; drinking; impatience; and hubris. The following values are percentage losses attributed to each category:
Errors: 45%
Gambling: 46%
Drinking: 25%
Impatience: 49%
Hubris: 21%
Total losses (not all at the same time, of course): 186%
Total losses as a result of stupidity: 141%
I divided the loss on my STD puts evenly between impatience and errors. I attribute all of the categories except for "errors" to some form of stupidity. My goal for 2012 is to cut out the stupidity. If I can do that, I think 2012 can be a great year.
I've come up with four maxims by which to go by in 2012 (that I've posted next to my computer monitor) to help reduce the stupidity factor:
I've decided to quantify a theme I have written about before to understand the actual impact that stupidity plays on my trading. My losses fall in to 5 main categories: errors in timing/direction; gambling; drinking; impatience; and hubris. The following values are percentage losses attributed to each category:
Errors: 45%
Gambling: 46%
Drinking: 25%
Impatience: 49%
Hubris: 21%
Total losses (not all at the same time, of course): 186%
Total losses as a result of stupidity: 141%
I divided the loss on my STD puts evenly between impatience and errors. I attribute all of the categories except for "errors" to some form of stupidity. My goal for 2012 is to cut out the stupidity. If I can do that, I think 2012 can be a great year.
I've come up with four maxims by which to go by in 2012 (that I've posted next to my computer monitor) to help reduce the stupidity factor:
- Keep yourself humble, or the market will do that for you.
- If you don't know, you don't trade.
- We don't trade when we're under pressure.
- Remain agnostic.
These four maxims, combined with a sincere effort to minimize my trading volume, should help reduce "stupidity" substantially.
The next part of my year-end review is actually a look ahead to 2012.
