Saturday, January 1, 2011

2010 Annual Performance Review

Back in the days when I was a wage peon for a large multinational corporation, we had annual performance reviews and God did I hate those. Invariably, I ended up not getting credit for the good work I had done and being blamed for problems I had absolutely no control over. Then I was told I was going to have to do better next year but not given any means of accomplishing that. I say foo on all that. That sort of nonsense is a big reason I just walked out one day and decided to make money in a way that I at least could have some control over and see the direct results of my decisions.

Ironically, my jump from wage slave to independent trader did not obviate the need for performance reviews. If anything, it's even more important. The big difference is that I no longer hate the prospect. If I do poorly, it's nobody's fault but my own and if I do well, I get all the credit and all the rewards. I don't have to sit through an hour of having to justify every decision I made all year to someone else who knows less than me but thinks he could have done better.

So anyway, let's get on with it. This exercise is primarily for my own benefit, but you may find it useful as a reference point to compare against your own results. I've divided it up into three convenient sections we'll call the Good, the Bad, and the Ugly (hey that would make a good movie title).

The Good

My total return for 2010 was 31.99%. I'm quite pleased with this because I not only beat all three of the major averages, but beat my own return last year which was 30.57%. This is important because last year was the first year I was profitable in trading. I lost 16.7% in 2008 and 10.8% in 2007. (I also lost money in 2004-2006, but back in those days I was so clueless I wasn't even keeping score. I think my losses then were similar to '07 and '08).

A 32% return also compares favorably to other benchmarks. The Dow finished the year up 11%, the S&P 13%, and the Nasdaq 17%. According to Seeking Alpha, Jim Cramer was up 31% in 2009 (I don't have his 2010 numbers yet). Warren Buffett, the ultimate investor, returned an annual average 27.7% in Berkshire Hathaway over the last 32 years (but only 7.39% over the last 10 years). Even Bernie Madoff's Ponzi scheme only delivered "returns" in the 13% to 20% range to his victims. And I understand that the Wall St. types consider anything over 20% excellent.

The Bad

I violated the Second Commandment of Trading a few times, "Thou Shalt Not Turn a Trade Into An Investment" (see the Ugly below for the First Commandment). In the spring, I took on positions in AKS, DRYS, CSIQ, AMD, and TIE. They started to go down. Then they went down some more. Then I was in deep. I decided to hang on. I was finally rewarded by AKS and DRYS which did give me my money back, but I'm still under water in CSIQ, TIE, and AMD, to the tune of a total of about $1,000. Now $1K may not even be sofa cushion change to ol' Warren Buffett or Bill Gates, but it's significant to me. These three stocks are my only losers for the year. The "bad" part is that they didn't have to happen.

The Ugly

Here's a graph of my trading balance on a daily basis for 2010. Those two Nixonian gaps in the middle are where I took some needed vacation time. While the end compared to the beginning is pretty good, there are two really ugly declines in there along the way. In the first, from May 3rd to June 8th, I took an ugly, nasty 13% hit. Now admittedly, the Dow was down even more during that time (about 15%) but still I'm afraid I broke the First Commandment of Trading, "Thou Shalt Preserve Thy Capital". You can excuse a one or two day drop that you didn't see coming, but there's no excuse for watching your account go down for a solid month without doing something about it.

And even worse, I did it again. From August 9th to August 26th, I lost another 10%. This was even worse because it happened over only three weeks. I'm going to have to think about that one.

The Rest of the Numbers


Here's a few other interesting numbers from my year:

* Win-lose ratio by day, 1.65. That's just shy of five to three, meaning for every three days I lost money, I made some on five.

* Maximum daily gain, 4.22%

* Maximum daily loss, -5.30%

* Longest winning streak, 17 days without a loss

* Longest losing streak, 6 days in a row

2 comments:

  1. Hi

    Tks very much for post:

    I like it and hope that you continue posting.

    Let me show other source that may be good for community.

    Source: Annual Performance Review

    Best rgs

    David

    ReplyDelete
    Replies
    1. Thanks for the link. There's actually some good stuff in there. I wish I'd had that back in the days when I had do write annual performance reviews for the Big Company I used to work for, an excercise slightly less appealing than a root canal.

      Of course today I work for myself and find myself to be a tough but fair boss. And I don't have to worry about losing my job. What am I going to do, fire myself?

      Delete

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