The markets I watch have more or less spun their wheels this week, so instead of posting updated charts, I'm going to stray off in to Avid Trader territory, and reproduce my current favourite passage from Jack Schwager's recently published Hedge Fund Market Wizards, a quote from Steve Clark.
Your job as a trader is to make the line [valuing your capital] go from bottom left to top right. That's it. If the line goes down too much or too long, you were wrong. You can't argue that the market is wrong because it is your job to predict every move in the market. You had managers in 2008 who lost 50 percent, and in some cases even as much as 80 percent. Why? Because they couldn't accept they were wrong. They kept doing the math, and they kept saying they were right. They missed the point. Their math might have been right, but their job isn't to do the math; their job is to trade what is in front of them. You had guys saying they were right, the market was wrong, and that they had billions of dollars of embedded value in their portfolio. Their job isn't to create billions of dollars of embedded value; their job is to make the line go from bottom left to top right. Once you understand that is your job as a trader, you have to start protecting the direction of the line.