Arnbjorn Ingimundarson

Leaving a Miserable Trade and How to Avoid Future Problems

No mention? I show a graph of the S&P 500 with the entry and exit points. It is plain to see how much the market fell in the meantime. I also acknowledge that it was a mistake not to use a stop-loss -- had I done that the trade would have been stopped in early September. Essentially, the whole point of this post is to own up to a mistake. However, I did have the discipline to stick to my original plan, which was to close the trade when the sell signal came, so I consider the results of that method much more meaningful than the maximum drawdown.

Please keep the context of my original recommendation in mind. I expected another leg down in the market, as I stated in my blog post, although it came sooner than I expected. For that reason I kept a substantial amount of cash on the sidelines.

As for continuing to monitor the SMMI, it is just one tool in the toolbox. I believe it can be useful, although of course not infallible, as long as you understand how it works.

Leaving a Miserable Trade and How to Avoid Future Problems

The last paragraph is meant to read "...given the current overbought conditions...", in reference to the rally that started in March. I mistakenly wrote "oversold". I just fixed this on my blog.

Leaving a Miserable Trade and How to Avoid Future Problems

As it is a momentum trade, it makes sense to keep a fairly tight stop-loss. I would say 7% or less from the purchase price.