There are only two types of investors.

Those who make mistakes and liars.

Intellectual honesty is one of the most important parts of this business.

It is easy to explain away a bad trade, highlight the winners, and quietly move past the decisions that did not work.

It is much harder to study the evidence and admit where your process broke down.

But that’s where the real improvement happens.

This is a glass house business. Everyone makes mistakes.

The difference is whether you hide them, repeat them, or learn from them.

So that’s what I did.

This review is focused on my discretionary “degenerate account,” not my long term trend following or systematic portfolios.

This is the account where I trade more actively, use options, occasionally short, and test ideas with real money.

The goal is not to beat myself up.

The goal is to identify where the process was inefficient, where attention was wasted, and where better execution could improve the second half.

Hopefully you guys can learn something from it too.

Across 112 closed trades, I held my winners for an average of 8.5 days and my losers for 11.6 days.

On the surface, that’s exactly what you don’t want.

I clipped the winners and married the losers.

The options data does needs a little context though.

Some of those losing contracts were already basically worthless before expiration, but I kept holding them until they formally expired.

That stretched out the average holding period and made the loser data look worse than the actual decision timeline.

Still, the lesson doesn’t change.

My risk was defined at entry. I could only lose the premium I paid.

But defined risk isn’t the same thing as efficient risk management.

Once the probability, time remaining, and payoff no longer made sense, there wasn’t much reason to keep holding the position.

Closing earlier wouldn’t have turned those trades into winners.

But it could’ve preserved some remaining premium, improved the account’s profit factor, and freed up capital for better option setups.

That matters because 12 contracts expired worthless and accounted for roughly 30% of the losses in the account.

The adjustment for the second half is pretty simple.

Options need exit rules too.

Not just a maximum loss, but a point where the math no longer makes sense.

Defined risk tells you how much you can lose.

A proper exit tells you when it’s no longer worth staying involved.

My biggest mistake may not have shown up directly in the P&L.

It showed up in the amount of time and mental energy I spent trying to perfect messy bottoming trades.

Software was the clearest example.

Semiconductors were trending higher.

Technology broke out.

The cleaner leadership was right there.

Instead, I kept trying to finesse the software catch-up trade.

The mistake wasn’t having the thesis.

The mistake was repeatedly trying to force the timing.

The same issue showed up in housing.

The bottoming thesis made sense. The risk was identifiable.

But bottoms can take a lot longer than you think, and when a position is too large, every wiggle demands attention.

That’s where position sizing matters.

A smaller position lets the thesis breathe without turning the trade into a second job.

A larger position forces you to trade every move, which usually means more decisions, more noise, and more chances to get chopped up.

Opportunity cost isn’t just capital. It’s attention.

A watchlist can quietly turn into a museum of old ideas.

You keep staring at the same charts, trading the same names, and assuming the next opportunity has to come from something you already know.

It doesn’t.

The second-half adjustment is to keep scanning, keep refreshing, and stop assuming the next winner has to come from the same trade I’ve already tried five times.

The January rotation was real, and it wasn’t especially bullish at the time.

Energy, materials, and defensives were leading.

Technology and other growth areas were lagging.

I recognized that correctly.

The mistake came later.

When technology regained leadership and broke out, I was slow to rebuild direct exposure.

I stayed too focused on laggards catching up instead of simply buying the groups that were already proving themselves.

Bull Markets reward a willingness to own strength.

That can feel uncomfortable because strong assets often look extended. But momentum isn’t always a flaw.

In a healthy trend, it’s often the whole point.

*NOTE – Like I said earlier, I use this account often to “fight” trends as my other account is more long term systematic trend following so it had exposure to tech and semis but it’s still good insight.

None of this means the first half was a failure.

My win rate was roughly 40%, but the account still produced a 1.75 profit factor.

That means about $175 in gains for every $100 in losses.

The edge was there.

The point of this review isn’t that the process failed.

It’s that the process could’ve been cleaner, more efficient, and less mentally expensive.

You don’t need to be right most of the time.

You need the math of the winners and losers to work.

The first half wasn’t about avoiding mistakes.

That was never an option.

It was about keeping them small enough to study.

The three lessons are pretty straightforward.

Define the exit before the entry, including with options.

Stop wasting attention on trades that refuse to work.

And in a bull market, don’t get so obsessed with finding the next leader that you ignore the leaders already sitting right in front of you.

Professionals don’t avoid mistakes.

They avoid letting small mistakes become big ones.

Anyway, that’s my two cents.

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The Sunday Stalk List

Tomorrow, I’ll break down more of what I’m buying in the Sunday Stalk List.

If you want clean charts, clear setups, and tactical insights, this one’s for you.

It hits your inbox every Sunday so you know exactly what to stalk for the week ahead.

Cheers,

Larry Thompson, CMT CPA

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