Sell Stop, Penalty Box, and Year in Review

I took a much needed break over the holidays so I neglected to post my stop out on (ACM) on 12/18 for about a 4% loss. As I said in my previous post, this was not unexpected and I immediately put myself in the penalty box for three weeks, which means I will not trade until at least 1/8.

I think the penalty box is a great limiter to prevent further losses. It eliminates ego from the equation. It doesn't matter if the problem is the overall market, my picks, timing, buy points - something is wrong if I stop out on 3 or 4 stocks in a row, and if something is wrong I need to take a break.

In this case, I think the last few months of the year there was far too much chaos in my job to allow me to invest effectively. Work took all my time and energy, leaving nothing for my family let alone a second job investing. Under these circumstances, it was probably a mistake for me to invest.

Additionally, we continue to languish in a bear market that is whipsawing even the most seasoned traders. The only safe bet at this time is the one not made. I still think we will see the S&P 500 trade down to 600 before it ever makes a new high, though that does not mean we can't have a tradeable rally before we sink to that level. As always, I'll try to keep my thoughts and feelings out of the equation and evaluate the price and volume action of the market indiscriminately.

At some point I'll need to dedicate some time to a thorough review of my trading last year, but for now I'll simply say that I showed improvement but I still have a long way to go. I'm pleased that most of my losses this year were actually costs of research materials, from trading I actually only lost $600. I made some mistakes and I could've earned money this year, but I'm moving in the right direction. I greatly outperformed my mutual fund benchmarks, mainly because I spent most of my time in cash. This is further confirmation that the first rule of investing is capital preservation.

This year I should soon make a career change that will afford me more time to refocus myself on investing. I intend to use this time to get back into the 'Trade Your Way to Financial Freedom' book and build a business plan for my trading activities. I expect this next step in my development will yield favorable results.

I wish anyone reading this a Happy and Prosperous New Year!

-Geoff