Hello Traders,

I hope you're doing okay, even though it has been a pretty rough start into the week. You might have heard about the recent big drop in the stock market. It’s been like a crazy rollercoaster with lots of ups and downs. The sudden fall was a big surprise and reminded me that trading stocks can be very unpredictable and sometimes risky.

I've been thinking a lot about what happened, trying to understand the situation better. It’s been hard because I didn’t have a backup plan, which made things even more stressful. But I’m learning from this experience and figuring out what I can do differently next time.

The Emotional Rollercoaster

The market crash happened really fast and it was a big surprise for me when Intel's value dropped by about 30% last Friday. I had quite a big amount of this stock in my account, which made it even more shocking. On top of that, seeing the S&P 500 go down and the Volatility Index (VIX) go up, plus the bad news about Intel, made everything feel even more confusing. This was a tough lesson that trading can be really risky, especially if you don’t have enough safety measures to protect yourself.

Mistakes Made and Lessons Learned

This experience has been humbling, to say the least. I've realized several key mistakes in my approach and I hope we can all learn from them! 

Unclear Stop Loss: I did not have set stop loss order that could have prevented me from this unpredictable crash. 

Unclear Margin Goals: I lacked a clear goal regarding my margin usage. This oversight led to overexposure and amplified losses. Setting strict limits on margin usage is essential to manage risk better.

Insufficient Fundamental Analysis: I did not anticipate the drastic drop in Intel’s value. Moving forward, I need to perform even more rigorous and comprehensive fundamental analyses to avoid similar surprises.

Lack of Hedging: I did not hedge against volatility adequately. The importance of having hedge, e.g. a VIX hedge in place cannot be overstated. It’s crucial to have a buffer against such unpredictable market movements.

Steps Toward Improvement

In light of these reflections, here’s how I plan to improve my trading strategy:

Documenting Learnings: Writing down my thoughts, reflections, and lessons learned is vital. This practice will help solidify my understanding and provide a reference for future decisions. I used our Emotion Tracker to think about my Intel trade, and it really helped me understand what happened. You can see a screenshot of my trading journal below. On the right side, I wrote down my thoughts and feelings in the emotion tracker. This reflection helped me to learn a lot from this trade.

Strategy Checklist: I will update my trading strategy checklist with my learnings. This renewed checklist will serve as a constant reminder of the principles and safeguards I need to adhere to.

I've added a screenshot of my private Trading Journal here just for you:

My Learnings

Clear Margin Goals: I will set clear, defined goals for how much I am willing to go into margin. By adhering to these limits, I can prevent overexposure and manage my risk more effectively.

Hedging: I will test different Hedging Methods in my Demo Account, like VIX hedging or hedging on the S&P 500. 

Enhanced Fundamental Analysis: I will deepen my research and analysis, focusing on better understanding the companies I invest in. This will involve not just looking at current performance, but also assessing potential risks and future outlooks more thoroughly.

Communication and Action: I am thankful for my two closest trading friends and that we discussed our learnings and actionplans together. Furthermore we can hold each other accountable on our trading plans.

Taking Action

Despite this loss, I made the tough decision to close my position. The size of the position and the overwhelming indicators pointing towards a further market decline brought me to this decision. It was a painful but necessary step to protect my capital and recalibrate my strategy.

In the end, this market crash has taught me a lot. Even though it was really tough, the lessons are important. I’m determined to learn from what happened, make some changes, and get better. The future might have some challenges, but with a better plan and being more careful, I believe I can handle it.

Stay positive, keep learning, and let’s keep helping each other on our trading journey.

Please share with me: How did the crash affect you? How do you protect yourself from big losses at unpredictable crashs? Relpy to [email protected]

Best regards

Your MindTrajour Team