September was my first full month of trading with real money after paper trading for over a year. In August, I put all our savings into the stock market, a total of $30,000, with the goal of beating the market.
When I talk about beating the market, I am using the S&P 500 as the benchmark. The reasoning here is that if I were not actively trading, I would simply put the money into an index fund where I would essentially be getting a market return.
If I can’t beat the market, I’m wasting my time…
Some would call those high stakes.
During the partial month of August, I earned a 1.34% return compared to a 1.24% return for the S&P. Although I outperformed the market in terms of gross return, I was actually lagging on an after-tax basis by 1.00%.
Of course that was a very small sample size. Let’s look at what happened in September.
September Trading Summary
September ended up as a great trading month. August provided a very strong buying opportunity, so I was fully leveraged entering the month and very active within the month.
Here is my Equity Summary directly from my TradeStation brokerage account:
I increased my account by $1,314.39!
That’s a return of 4.32% in a single month!
But my performance by itself is tough to evaluate without the market context. During September, the S&P 500 rallied 1.93%, which means I more than doubled the market return.
This puts my cumulative return at 5.73% compared to 3.20% for the S&P.
The chart shows gross return because the after-tax component is only meaningful after a full year. In order to evaluate my performance on an after-tax basis, first I have to annualize the returns.
My current performance would put me on pace for a 40.98% annual return compared to 22.88% for the S&P… before tax.
Looking at performance after-tax is critical because taxes are a very real cost. It doesn’t matter what you earn, it matters what you keep.
Long-term capital gains are taxed at 15% while short term gains are taxed at ordinary income rates.
Active traders are at a huge disadvantage.
Taking into consideration the tax implications, my cumulative performance would put me on track to beat the market by 10.02% after tax.
While that looks fantastic, let me go ahead and say right now that my current pace is unsustainable. I would love to be wrong about that but I’m being realistic.
The type of buying opportunity that occurred in August and September, which is when my trading system works best, only happens a couple times per year.
September Trade Detail
I carried 7 open positions from August into September and opened 18 new positions during the month. Out of those 27 trades, I closed 20 of them and carried 5 open positions into October.
Out of the 20 closed trades, I classify 11 of those as winners, 6 as breakeven trades, and 3 as losers. My typical risk per trade is about $180 (0.6% of my account) so 7 winners had a profit greater than my risk. Plus I already locked in most of my profit on one open trade (NYCB) for another solid winner.
I’ve included my first exit and last exit date in case you would like to review these specific trades. My favorite place to view stock charts is at the appropriately named Stockcharts.com.
Please note that I normally scale out of my trades at different target levels, which I why I refer to the date of last exit and average exit price.
September was my first full month of trading real money since I went on my paper trading hiatus in order to build up a larger sum of trading capital…
…and it was as good of a start as I could’ve hoped for.
The market was up but I outperformed the market by a good margin. September ended as one of my best trading months ever (real money or paper).
For that very reason, I’m also fully aware that this level of performance is unsustainable. If I could do this every month, I’d be making over 50% in a year! As I get more months under my belt (aka more data), I’ll be able to better evaluate my performance.