Monday, August 31, 2009

A personal benchmark

My trading year starts on September 1, something of a psychological decision. The academic side of me says that it’s back to school time. The contrarian side of me says that autumn is not a time of melancholy but a time when nature is at its most glorious—at least in Connecticut. (The picture, by the way, is an early autumn view of my “back forty”—don’t take that number literally--and beyond. The pond and the trees on the far bank are part of the property; the rest of the color is compliments of the local water company.) And, quite frankly, I’ve never been a fan of New Year’s Eve revelry. Wall Street has thought otherwise. The major averages have dramatically underperformed in September. But for that portion of my portfolio that doesn’t give a tinker’s damn about which way the markets move, why not start the year in September? The only downside as far as I’m concerned is that there’s a shortened trading week for Labor Day and light volume days for the Jewish holidays.

A new year inevitably brings with it new resolutions, for the most part broken almost as quickly as they’re made. I have only one, an impersonal grudge match as ludicrous on first blush as it is real for my psyche. I want to beat Goldman Sachs. I really, really want to beat Goldman Sachs! Here’s the benchmark, and it’s admittedly very high. Perhaps yet another manifestation of the Icarus complex, but I consider it more a stretch than a giddy flight. A Zero Hedge post (June 23) about GS’s risk exposure prompted me to do a very rough back of the envelope calculation of GS’s 2008 mathematical expectancy. [Mathematical expectancy is the (percentage of wins * average winning trade) – (percentage of losses * average losing trade).] I came out with the magic figure of 2.37. This number may be sheer fiction, but it’s the number I have adopted as the benchmark for my 2009-2010 intraday trading. I will not factor in commissions since I certainly don’t want to start out behind the eight ball.

I may or may not keep you posted on my progress. Silence doesn’t necessarily mean failure. I was taught (erroneously, I now believe, but nonetheless deeply ingrained) not to toot my own horn.

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