History – Macchia69

The learning curve

Cycling the length and breath of New Zealand in 2015

In early 2020, I began exploring as a potential platform for online trading. Having experienced the fallout of the dot-com bubble, I had spent the first two decades of the new millennium focused on investing, leaving the intricacies of trading to the professionals. Prior to this, I had been immersed in work and had dedicated several years in the mid-2010s to globetrotting on two wheels (more details on my adventures can be found on my other site x10loupe.net).

Unexpectedly, a windfall came my way towards the end of January. Without having anticipated this financial boost, I decided to use it as seed capital for a modest venture that would later evolve into the Macchia69 project. Little I knew then about the rollercoaster I’d be finding myself on.

Initially, I had been dabbling in the virtual portfolio, predominantly dealing with commodities, especially oil and natural gas. When I transitioned to real money I continued with the same type of trades, however, the unforeseen onset of the COVID-19 pandemic disrupted my trajectory. Many may recall the period when oil futures briefly turned negative.

Subsequently, my financial situation took a further downturn, marked by a series of my own mistakes. Despite attempts to inject and recoup capital, my portfolio dwindled to $922 out of the $10,000 I had progressively invested on the platform. While not a perfect “90-90-90 rule” * scenario, I found myself in the company of that majority of traders who, within approximately 100 days of starting, had lost the majority portion of their funds. But i did not give up, and in the descent I gleaned valuable lessons, as mistakes proved to be as they always are, the essential part of a learning process.

* 90% Of new traders and investors will lose 90% of their money within 90 days. They call it the 90-90-90 rule.

Getting out of the hole

From my trading experiences, I gathered valuable insights:

Engaging in swing trading with commodities is imprudent due to their volatile nature and associated high charges. This lesson was learned through substantial losses incurred in trading natural gas.

Caution is warranted when dealing with contracts that undergo rollovers. A notable incident involved the closure of the China A50 CFD, resulting in another financial setback.
Blindly following the “wisdom of the crowd” or what I term “the herd” is, in essence, unwise. Examples abound, such as mistimed buying and selling of Tesla shares and misjudgments regarding the perceived bottom for oil prices.

On the positive side, I also discovered:

That focusing on shares may not be the best approach given my limited interest in poring over financial papers and company reports. I opted instead for an trading indices, which are characterised by self-rebalancing and the fundamental analysis of each company is, somewhat, performed for me.
Successful swing trading is achievable by selecting a well-established and diversified index which contains a sector-diverse array of companies, thus mitigating violent market swings.
Choosing assets without periodic rollovers is crucial for avoiding contract closures at a loss. This ensures contracts can remain open for as long as necessary to secure profits.
Striking a balance between overnight fees and dividends is essential, preventing excessive costs. Some contracts may remain open for an extended period without being crippling.
Opting for an index provides a smoother growth curve with a smaller short-term fluctuation window. This allows for selecting a mid-price point around which prices tend to hover the majority of the time. This of course does not protect you from black swan events, nothing can do that, but an open eye on the macro-economical climate can steer you clear of most of the rest.

In light of these lessons, I decided on the FTSE 100, an index comprising the 100 companies with the highest market capitalization listed on the London Stock Exchange. It meets all the criteria discussed, and given my location in Europe, trading hours align favorably compared to other options.

The way forward

As evident from the chart above, the turning point on September 15, 2020, marked a significant shift. Engaging in swing trading on the UK100 not only recouped my initial investment but also witnessed a remarkable 400% growth over the subsequent three years.

This growth unfolds in three distinct phases, which I’ll dub as the “What the hell!” phase, “Hey, something is happening here!” phase, and “This is working!” phase.

The “What the hell!” phase spans from -$9,164 to $0. During this period, I threw everything into the trades, often pushing the sale limits to its limits. Leveraging at X20, there were moments when my cash reserves nearly dwindled to nothing. Through a combination of persistence and a touch of luck, I managed to recover, bringing my portfolio value back to the initial loaded amount on the platform.

Transitioning into the “Hey, something is happening here!” phase, my portfolio value continued to climb from its baseline to the point where I achieved recognition as a Popular Investor. While still employing X20 leverage, the strategy shifted toward caution, focusing on the size and intervals of trades. Returns remained impressive, amplified by favourable macroeconomic conditions, making the spring of 2022 an exceptionally lucrative period.

Sunset in Bretagne (Cap Gris-Nez)
400mm, ISO 125, f22, 1/25 sec

The “This is working!” phase unfolds from February 2023 onward. Now holding the status of an Elite Popular Investor and I must exercise greater caution in managing overall risk ratings. I am also bound to operate with a reduced leverage capped at X10. Although the projected return for this year hovers around 40%, a departure from the triple-digit returns in the previous phases, it still outpaces inflation by a considerable margin.

Yearly performance breakdown

Here below you’ll be able to see the yearly profitability of the portfolio for each of the calendar years I have been on the eToro platform.

The returns are unrealised net return, i.e. based on the growth of the unrealised portfolio but after removing fees.

2020 was the year I started, and as you can see, it was dotted with mistakes. February, March, and April witnessed unwise trading of natural gas; July saw some money dropped on tech shares, and August on the China50 index CFD. Around mid-September, I turned the corner, and from then on, the only way was up. You might ask how I could go beyond losing 100%. The answer is, as you can see from the chart at the top of the page, I continued to add money to save myself from doom.

2021 was the highest returning year. After having lost everything, I traded at 20X leverage with almost no margin of safety, frequently maintaining an 8 or 9 out of 10 risk score. It worked, and I ended the year with a +170% return.

The year 2022 began strongly, and it was during this year that I surpassed not only the first 100% but also reached 200% and eventually 300% of my initial investment. Toward the end of the year, I applied the brakes a bit to rein in the risk level, as the idea of becoming a Popular Investor had taken root in my mind.

Despite a slow start and the challenge of managing risk within the right parameters, I joined the PI program at the beginning of February. I am currently trading with a 10x leverage and maintaining strict risk level boundaries. Although the returns have decreased quite a bit, achieving a 40% return is no mean feat in today’s market.

What’s past is prologue

William Shakespeare