UPDATE: 2016 Tools of the Trade post is now published.
As a huge advocate of post trade analysis, taking the time to look back over every trade made throughout the year is critical to long term success.
Without question, 2015 for me was one of the toughest years of trading in some years.
The first half of the year was uneventful with record low volatility and the back half was packed full of drama, highlighted by a three day crash in late August. The S&P 500 closed the year down -0.7%.
Before getting into the nitty gritty, it’s important to understand that I do not trade for a living. I trade as a hobby when I have free time. My daytime job is running this site alongside StockBrokers.com and InvestingTeacher.com. You can learn more about us at ReinkMedia.com.
My retirement accounts are 100% allocated to low cost passive indexing via Vanguard and the S&P 500. There are a handful of very good reasons for this. For personal trading, I purposely limit my portfolio size. Similar to 2014, I once again allocated ~$60,000 to trading for 2015.
I had three primary goals heading into 2015:
- Trade less frequently and focus on high quality stock selection
- Lower my total commissions bill
- Outperform the S&P 500
Fortunately despite several horrendous losing streaks, I was able to accomplish all three goals. Here’s how I did it.
Goal 1: Trade Less Frequently and Focus on Quality Stock Selection (SUCCESS)
In 2014 I made a whopping 443 round trips. In 2015 I cut that number down to 45. A reduction of 398 completed trades or -89.8%.
Cutting back on trade frequency was no easy task for me. For years I’ve struggled with over-trading which not only lead to expensive mistakes but hefty commission charges and overall frustration.
The results of focusing on quality stock selection are easy to see in Trade Journal.
The first numbers highlighted are my wins and losses. Notice how my batting average was a whopping .200. This means that for every one winner I had four losers.
However, my average winner was +$1,728.49 while my average loser was only -$241.82. A monster difference. This is all about cutting losers short and letting runners run. Quality stock selection allowed me to achieve this.
Lastly, my biggest winner on the year came towards the end with my +$10,010.55 Valeant (VRX) trade. My largest losing trade for 2015 didn’t event break $1,000.
Here are my 10 largest winners and losers.
Goal 2: Lower my total commissions bill (SUCCESS)
In 2014, my 443 round trips costed me $5,406.32. Note each round trip consists of at least one buy and sell, some more when scaling in and out of positions.
Mind you, this was with a $60,000 portfolio which equates to essentially a 9% expense on the entire portfolio just for places buys and sells.
In 2015, I switched to Merrill Edge and took advantage of free monthly trades via the Preferred Awards program.
Free trades coupled with less frequent trading brought my 2015 commissions bill down to $140.95. The only reason it wasn’t $0 was because I accidentally logged into my old broker account several times out of habit and initiated new positions.
All said, my total commission spend dropped from $5,406.32 down to $140.95 for a cost reduction of 97.4%.
Goal 3: Outperform the S&P 500 (SUCCESS)
I have learned a lot about trading over the years, with one point of wisdom being that a single trade can make or break your year.
In 2015, thanks to the Valeant (VRX) trade, I was able to take my portfolio from the red to well in the black.
Portfolio Return: +$6,709.87 after commissions (+11.4%)
S&P 500 Return: -0.7%
Here’s the breakdown. Note, it states Dec 2nd as the last reported balance value since that was when I closed the Valeant position and I sat in cash the remainder of December.
This chart really depicts just how much a grind 2015 was. The first half of the year was a huge struggle of loss after loss. It reminds me of early 2008. Patience paid off though with two big winners in the back half of the year.
Closing Thoughts, 2016 Goals
Trading is a life-long game. One year equates to a single chapter in a lengthy book. For a happy ending, time must run its course with many triumphs and defeats.
2015 was not an easy year to be a trader or investor. Thanks to proper risk control, discipline, and a big winner to close out the year, I was fortunate to finish in the black.
My goals for 2016 are three fold: bring my commission costs down to $0, continue to hone my trading strategy + discipline, and once again out-perform the S&P 500.
Thoughts and feedback? How was your 2015 trading year? Feel free to email me and let me know.