The Month That Was

This was a very tough month for many, regardless of your size, experience, shape etc.. The most laughable thing was the fact that the SP500 and the Dow Jones were virtually flat.  But the action underneath was brutal, and it has been that way since March 6th.  Of course you will read about the great rotation in staples, energy, etc…but the funny things is–that you normally read about that when the etf’s are already up 4-5 days in a row and then they have a natural pullback that shakes out those who only believe in the great rotation on the up days but not the down days.

I survived this month by;

  • Realizing and accepting that my bread and butter strategy is not in vogue right now.  Many know when the market is not favoring their strategy, only a few have the discipline to accept it and act accordingly.
  • Realizing that in this business the bulk of your gains will come in only couple of months of the year.  So it is important to protect your capital and more importantly your emotional capital during the choppy months. This reminds of Kevin Daly who achieved  800% cumulative return in the same 12 years that the market was virtually flat, he accomplished that by sitting largely in cash during negative environments.
  • The common mistake most people make is to try to create or find a trading system that will work all the time, It’s insane to think that any one system will work well in all market conditions”–Van Tharp.  This last month the little that I did was more focused on trading mean reversions rather than buying breakouts.  In my experience mean reversion works better in corrective markets than breakouts.  But remember, with mean reversion trades you must use stops like you should with any strategy.  For the most part mean reversion eats like a bird and shits like an elephant, just look at $FEYE $DATA $ZU $SPLK and a bunch others.
  • By surviving I mean UP, with little volatility, risk, and draw-down.

I’ve been in this business for 17 years and I have seen many brokers, traders, clients blow up due to excessive action during times when there should be inaction.  And I know that sounds weird, many feel that if the market is open something must be done, there’s bull market somewhere they say, or some are concerned with what their clients will say due to the inaction so they will try to make something happen when it is really best step back, etc….This market environment is sort of like trying to run a 1 on 3 fast break, the odds are against you, but if you score you will look good but that type of hero ball won’t get you to far.  Scoring 30 points shooting 10 for 31 is not the same as scoring 30 shooting 10 for 15, pick your spots.

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Frank Zorrilla is the founder of Zor Capital LLC a New York based investment management firm.  Our goal is superior performance, with preservation of capital as our number one priority. Zor Capital manages separate accounts (both taxable and retirement) for accredited investors and institutions. This structure gives clients access to a hedge fund like strategy while maintaining 100% control of their accounts.  Managed Assets

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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