Recent lack of actions in the market has given me opportunities to focus less on the day-to-day market action and more on my own trading development. Besides working on my quantitative research, one of the tasks that I like to do is to review what I have thought previously in a similar time. This takes us back to a year ago, August of 2009. Headlines from my fifteen posts back then shows that I was trying desperately (in hindsight) to short the market. Why would I do that? Take a look at this 3-year long weekly chart of S&P500.
[caption id="" align="aligncenter" width="570" caption="S&P500 weekly chart"][/caption] On the chart, August 2009 looked like a great shorting opportunity. The resistance level at 1000 seem too good to be true (it was). In fact, I said the following words on August 22, 2009:
While thereÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢s been much talk of economic recovery and a new bull market is already with us, I still am not convinced just yet. True, the bears might be MIA. But all signs say that this bull weÃƒÂ¢Ã¢â€šÂ¬Ã¢â€žÂ¢re seeing is standing on thin ice.
How wrong I was. Since breaking the 1000 resistance back then, the S&P hitched on the bull train to steam upward steadily on to 1150 (Figure 1). It took a break there and continued on to 1207. Looking through my trades back then, I eventually stopped shorting the market after S&P broke above 1025. That was the good part. The bad part is that I wasn't able to change my view and remained stubbornly bearish (but at least didn't commit to any new shorts) for weeks afterward. If I were to sum up my lesson in the past year, here's what I would say to myself back in August 2009.
Trading is not about being right. It is about knowing when you are wrong and doing something about it.
On a final note, it was in August of last year that I started to paper trade the forex market. I can't believe it has been a whole year already!