Marks & Sparks – Recent Trade

Hi, heres a chart of a recent trade.  It shows 2 things:

  1. A recent trade taken last week
  2.  It also shows that if you’d bought and held this share at the low prior to point A (March 2011) you’d have just started to make a profit in February 2012 some 11 months later

This is why I don’t buy and hold – it’s virtually impossible to know when a share or market will do in a 12 month period – It just suits my personality to know for certain what I’ve made by trading/investing often.

I bought with my entire pension fund the trade I show on the chart below, profit is now locked in to 3.5% and what I will simply do is move my stop up every single day until it’s hit – therefore potentially locking in more and increasing profits daily – 3.5% a week compounds up to a pretty decent annual return, once I’m out of this trade I then need another to produce the same returns the next week or so – and simply repeat.

The reason I do this is because I don’t want to own this share for long, at some stage in the next few days to week this share will have a reaction of some degree – I don’t know what kind of reaction, it might only be a 1 day pullback, it might be a 6 month sideways to down reaction!  If it’s the latter I don’t fancy getting trapped anyway.  I’d much rather be in control of when and how I trade this one in the future, rather than being trapped in a trade.

My techniques generate from 30-100%+ per annum – every year, it depends how much you trade as to what returns you obtain – My style during a bull market will be average compared to the overall market (as I dive in and out) but during a sideways or bear market my returns massively outperform the general market and in the general fund managers out there.  Remember you do not have to always be trading/investing.

Bear markets are just as common as bull markets – I’ve studied the stock market enough to know that fact.  Take a look at 1965-1982, the market moved sideways for 18 years (ish), then what happened?  A 18 year bull market!  One thing I will give away, do you know that this same period (1965-1982) was virtually repeated back in the 1800’s! The stock market is nothing more than a repetition of previous decades but on a larger scale as it grows!

One of the main problems lies with the fact that most people of aggressive investing age don’t know anything but the 1982-2000 bull market.  Long-term charts can add to this problem as they only show the last 10-15 years worth of data!  These investors only think markets go up, even with the events of 2007-09 their convinced it’s only a blip.  Within the next 5 years there’s 2 critical dates.

Here’s the M&S chart, commentary on it and below it:

Let’s look at the trade first – the short-term trend as confirmed by the moving averages is UP, the DTosc made a BULLISH reversal = BUY / go LONG.    So I did  Went long @ 355 (H), with a STOP in place straight away at (L) 348.20.  My risk is 1.91% of my account value so I’m looking to make a profit of at least 1.91% unless it’s not worth my time taking the position.

I’ve not considered the higher time-frame DTosc position as this trade in that position was virtually odds on to go higher, which it did – they don’t always do that though!  I’ve now placed a trailing stop at the low of yesterdays low price – why?  The (8) DTosc is now overbought, if the (8) DTosc is following price best then it’s suggesting a potential short-term top might be forming, so if it is it’ll hit my stop, if it continues to rise then so will my stop, to todays low price and so on until I get stopped out of the trade.

Whatever happens I’ve made 3.5% in the space of a week and locked in that profit.

Don’t get me wrong, the DTosc is a wonderful tool but there are times when it’s simply wrong and it does not work – I will in future weeks produce a blog post of times when it fails and gives bad signals – hence why I use it in combination with other methods detailed on this site.  Saying that I don’t of another indicator on the market that is as precise as the DTosc and this indicator gets you into moves just after they’ve started, not half-way through a move as other indicators react slower.

If you want more detail on the DTosc click here

Always remember that shares don’t know you, they don’t care whether they crash at just the wrong time for your personal circumstances (i.e. retirement), they don’t care if you make money or not – You as an investor should be ruthless too and not give a damn about the share, the whole point of investing is to make money at a faster rate than alternative methods i.e. Bank accounts.

Right let’s look at the chart again but this time between points A & B – this share was falling, in a down-trend – if you were holding this share then you’d be losing money.

My methods would have you ditching the share towards the top and possibly considering shorting it – look at the share price moves around point A – for a start the DTosc would have been overbought, you’d have raised your stop up which would have got you out around the 378 level, you might have got back in when price pull back to the red EMA line and that would have resulted in a losing trade of 2%, thereafter the trend is confirmed down and you’d stay out of the market or go short on the DTosc bearish reversals until point B – profits on offer between point A-B would have returned 30%, from september 11 – January 12 you could have picked up 10% profit and from Jan 2012 there has been 20% available in total = 50% from one share in approx 10 months just from investing smarter and not buying and holding.

There would have been one losing trade just after point A which would have cost you about 2% of whatever you exposed, but losing 2% and then gaining 50% – makes you understand why as a professional trader you just accept the small losses!

To me investing that way just makes sense, to others it won’t that’s fine – we all invest differently.

The purpose of this blog is to show you what is possible as there’s a lot of misleading information out there on how to invest.

Hope it helps.

UPDATE: – 19th March 2012

I’ve now exited this trade at the close Friday just gone, for a 7.32% gross gain – Why?   Fridays bar was whats called a wide range bar and placing a stop underneath would give too much profit back if it falls, so I’ve taken a logical decision to cash in and take profits – if all is well this share when the DTosc makes another bullish reversal BELOW the 20% level then I’ll get long again.

Can you also see how on this one trade I’ve made 7% in one week – If all I did was trade once or twice per month for a 5% return, the returns rack up – even if I quit now for the year and repeated 7% next year and every year thereafter – I would grow my money at a decent rate over time.

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1 Comment

  1. I will in due course show you times when the DTosc fails, because it does every now and again, which obviously makes you lose money

    Reply

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