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Trying to get out of the red

So the Rutgers MQF trading desk is not doing too hot at the moment, sitting at the bottom of the pack. It’s been a long process figuring out what we’ve done wrong and what we can improve on but I guess there are a few things that stick out to me in terms of what has caused this negative balance.

1. Not having a portfolio set up earlier. We missed at least a week of nice gains by not holding onto any positions and keeping our portfolio basically empty. This has hurt us probably the most as the desk missed out on a lot of potential profits. I would attribute this mainly to the fact that our desk was planning on doing mainly short-term trading when the desk first started, but as time progressed we realized this was just not possible.

2. Bad luck. Yes, it seems like the most common excuse to blame your losses on something outside of your control, but I feel my time spent as a professional online poker player let’s me see things in a more objective manner than most as I do not like to be results oriented. I attribute this bad luck to one trade – buying CBEH. Literally a few days after buying the stock, allegations of insider trading hit the company and the stock tanked. We sold the stock as soon as we could to cover our losses but we already suffered over a 50% loss in that 1 position. Most bad news, like the earthquake in Japan, has an effect on everyone’s portfolio so I would not attribute something like that to why we are doing poorly compared to others. However, in a case like this, specific news on one company is something that is having a significant negative impact on just our portfolio and not others and is completely outside of our control and expectations. This has caused the bulk of our losses.

3. Transaction costs. This is something I feared in the beginning when our fund first started and something I addressed but I guess it’s quite difficult to see the exact impact it has. It’s also something I’ve thought more about lately in relation to our trading portfolio and I would wager to say that, if not for the big loss caused by CBEH, this is the main force cutting into our profits. Even not including CBEH into our portfolio, we are still trading at a loss and I think that having too many transactions is the culprit. I would need to do a more thorough analysis and somehow be able to backcheck the transactions we have made, but if we have done 50 transactions, then assuming the transaction cost is $7 we have spent $350 on transactions! For a $10K portfolio, that’s a 3.5% reduction in returns over a short period of time. If we continue to have high transaction costs there is absolutely no way for our portfolio to be profitable.

So the best thing to do now is to just learn from these mistakes, know that we need to continue to be vigilant and hopefully our hardwork will pay off in the end.