July turned out to be another losing month in grains. Weather has been perfect for grain productions in most of growing regions worldwide causing grain futures dropping continuously. Many of my bull puts from June required rollover in addition of June's rollover. My thoughtless entrances of soybean and corn in June and add on proven to be disastrous on top of wheat losses. The total loss was $19,700 offset with some small gains in ES and CL. Some of my bear calls and puts in grains helped some but were not enough in size. I still haven't figured out the ratio of hedging.
The right things I did:
1. Stopped fighting the trend in corn, wheat and traded with the trend. These bear calls and puts buying made $7000 to offset the losses. Otherwise my loss would be much bigger.
2. Being more patience. I didn't rollover immediately after taking losses. I studied the seasonal trends and decided to wait for prices to come down further before entering my recovering orders. It's hasn't been good timing but I think it has saved me some further losses or better entries. The down side of it is that it may take me much longer to stay in these trade thus increasing my risk and cost of carrying such positions.
3. Less emotional. I recognized more of my urges of fighting the trend and making up my losses. It's the human nature to react to threats and attacks immediately. In trading it requires to think and react them differently. Winning and recovering can be achieved from opposite directions.
The mistakes I made:
1. Not following rules. I continued to use add on despite my updated recovering procedures in June already limited this strategy in commodity options. In my reasoning and calculation such add on is not effective and often leads to bigger losses in a clear trending market.
2. Not taking stops as plan required. The losses of this month could have been much smaller and manageable if only I took stops as my trading plan required. Instead I let it run much deeper and thinking I could add on to such losing positions.
3. Lack of continued learning to improve my trading skills and knowledge. I used to take webniar or recording several times a week. But I haven't done so for several months. I haven't even finished the Option Selling book which I ordered at the end of last year.
Those are the areas I need to correct in August. Remember: If I keep doing what I have been doing I will keep getting what I have been getting which is big draw downs that wipe out my entire gains of months and years. Am I willing to be successful in this business?
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