February Market Review 2023 by @mrstocky on eToro

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February Market Review 2023 with Yue Zhang

Yue Zhang gives his eToro followers a review of his Popular Investor positions in February 2023.

For more on Popular Investors, check out our related post How to Copy Trade on eToro.

@mrstocky February Profits Summary 2023

Another respectable month of +4.6% adding to January gains.

YTD we sit at +7.8%. It has been a good start to the year.

My 2023 returns may look very similar to most other Popular Investors but the way I have generated those returns differ significantly. My gains have come from both long and short positions. Specifically, the returns in February resulted from short positioning.

It wasn’t all smooth sailing though. Copiers and I had to wait patiently to be rewarded as equity prices moved laterally for the majority of time.

Returns got an extra boost as we had the opportunity to add to our short positioning with a high conviction trade. It was just in time. Equity prices moved lower soon after.

We then took profits according to the exit signal to lock-in those gains. Overall, it wasn’t an active month of trading. Instead it was patience that won out.

@mrstocky CopyTrading Strategy Changes February 2023

In February I implemented improvements to my trading Strategy as highlighted in the January monthly report.

i) An increase in the level of risk use especially for high conviction trades. This has made an instant impact as explained above. As expected, this was also reflected by the shift up in the eToro Risk Score.

ii) Live Testing of my Volatility trading strategy. This has ceased as I have come to realise that in order to implement it at full scale, it would not be feasible from a liquidity standpoint. The range of instruments on eToro are insufficient to absorb the size of the trades required if I were to have a much larger Assets under Copy. Therefore the overall impact made by the Volatility strategy would be minimal as I would need to reduce the exposure significantly.

iii) Related to (ii), I have, however, been able to apply the Volatility strategy to equity indices e.g SPX500 or $SPY. The returns look very stable although unspectacular when compared to the Volatility strategy itself. The benefit is that with equity indices, I am free from liquidity constraints. For example, I could trade a $100m position and it wouldn’t make any impact on entry or exit prices.

As the returns are not spectacular (although still attractive), at a maximum allocation of 20%, it would only add a marginal impact to overall returns. I’m not sure it would be worthwhile to add this to my current Strategy given that it would be highly correlated. It would make more sense as a standalone strategy but eToro does not allow Popular Investors to manage more than one strategy.

February Market Review 2023 by @mrstocky on eToro
3 Year Performance Summary of @mrstocky on eToro

Medium Term Market View

My medium to long-term view of equity markets has not changed. We are still in a Bear market. I still think markets will see lower lows. Looking at the S&P500 equity index chart ($SPY) on a monthly time-frame, both January and February were an opportunity for the Bulls to reverse the Bearish trend.

The requirement was to close above the monthly high at 411.73 set in September 2022. [Note: the Sept monthly bar was the last Bearish bar that set a new closing low.]

If Bulls were able to manage a monthly close above the high of Sept, I would have considered the Bear market OVER. BUT It failed in January.

Despite a breach above the high in February, it again failed to close above 411.73. Now the picture is slightly more complicated. Instead of a monthly close above 411.73, I now need to see a monthly close above the new high set in February at 418.31.

This is feasible if Bulls can push on in March despite a lacklustre February effort. If I look at the daily chart, price has been making higher highs and higher lows since the Oct 2022 bottom. The “shorter-term” daily price action is still pointing bullishly.

However, if this daily Bullish trend falters, then the Bears would find it much easier to push prices lower and align more favourably to my long-term bearish outlook. You might be wondering as to why I place great importance on the monthly chart? This is because in my view, the bigger the time-frame the more meaningful it is from a technical charting perspective. i.e. I would rank with a higher level of importance of a Bullish trend on a monthly chart than on a daily chart or to an hourly chart.

Summary of @mrstocky February Market Review 2023 on eToro

I don’t trade based on my longer term views. I am a short-term Trader. I use longer term views to help explain the narrative and to put short-term movements within context.

Thanks for copying,

MrStocky Full-Time Trader, eToro Popular Investor

Your capital is at risk. Other fees apply.

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