Everything is easy in hindsight. I was cautious about the SPDR S&P 500 ETF (SPY) going into the Fed meeting.
I still don't regret the call because I added a primer to it beforehand: the $206 level. A break over that and I thought the cautious stance was wrong and shorts should be abandoned. AKA: stopped. AKA: wrong. That's what a stop is for technicians. It is an admission of guilt. An admission that any previous trading thesis is either incorrect or invalid.
A trend or momentum can take over and it simply is not worth fighting. It hasn't worked for the better part of a decade now. Perhaps the contrarian style will begin to really work again here on a wide scale. It has been successful on more-focused scales as of late. One can note, as James "Rev Shark" DePorre has pointed out several times, the vast majority of stocks are under their 200-day moving average, so there have been huge pockets of weakness even as the overall market climbed higher.
When we talk about hindsight being perfect, the valuation of KaloBios Pharmaceuticals (KALU) comes front and center. No trader I knew believed this company was worth $25, let alone $35 or $45. Most traders believed them to be worthless, but they also knew there wasn't a darn thing they could do about it.
It's one of those situations where your hands are tied. It's a short squeeze where fundamentals and even technicals go out the window. The price goes exponential and no one has any idea where it will stop until it finally does. We look back and say it was so obvious, but in reality, it is only obvious in hindsight. But there is a benefit to hindsight if we come to know it as review.
Have you ever had one of those weeks where no matter what you traded it seemed as if you could do no wrong? You saw the markets with clarity and traded it to near perfection. Then as quickly as trading nirvana entered your life, it was gone leaving you with loss after loss. What to do?
It's a tough question, but this is where hindsight can be of assistance. First, don't panic. Slumps happen to all traders. Cut your positions sizes or take a few days off and get your emotions in check. During the time away, pull up all your trades, both good and bad, and compare them.
Did you use the same strategy for both the winners and the losers? Even a small tweak in your approach can turn winners into losers.
Was there an influencing outlier? A little over a week ago, I thought the chart of First Solar (FSLR) looked very bullish. Only a few hours after the observation, the company warned on earnings. The stock got smacked. There was nothing technically wrong with the setup and that was my approach, technical, not fundamental.
Fast forward a week and the solar sector as a whole gets fundamental good news and the stock roars higher. Neither move was driven by my initial thesis. A loss for sure, or a lucky win for some, but from a technical point, there was nothing wrong with the original thesis. It simply did not work initially.
You might be surprised to find this type of thing influences many of our wins or losses. Perhaps, the market overall was very strong (or very weak) on your week of winners, but choppy when you had losses. This might help you conclude your style or thesis works better in one type of market than another.
Or you may look back and not even know why you were in some trades. If those trades were winners, they may have been luck. It happens more than you might think. Take some time and outline the exact reasons for every entry and exit, then compare. It's worth the time.
On the exit side, compare also when you took losses or profits. Were you more lax with stops in one week vs. the other. Did you scale out of positions? Did you average down? Average up? Create a journal and review the darn thing. That's why you have it. It can be considered a little bit of hindsight, but it will be a lot helpful.
The biggest takeaway, however, is just to slow down and keep your emotions in check if things start to slide away from you. Don't fight your mistakes, learn from them.