FT has been trading full time from home for two years, with nothing but four kids and a beach to distract him .
He fills his spare time with weight training and rugby, though more coaching than playing these days.
FT mostly trades the forex markets and although he plays FTSE on occasions his bread and butter market is £$.
He likes to think that his technique is evolving but still hasn’t the temperament or money to back the big calls. He prefers to trade between 1 and 3 times a day, aiming to take regular small gains, but feels part of the evolution is in not dealing if the conditions don’t feel right.
The Dollar Chicken And The Oily Egg
Morning folks,
Well, yesterday I went against the crowd and the crowd won. After a brief moment in the sun, my short FTSE position turned against me. There’s a bit of a circular move in markets with lower oil and gold fuelling higher equities and a stronger Dollar. Alternatively, the stronger Dollar is causing oil and gold prices to fall and therefore equities to rise.
I’ve decided to provide a live example to new traders of what not to do; I’m going to continue running my short bet in FTSE, for the time being at least. What I should be doing (and what I’d normally do) is to stop myself out of the trade, kick the cat and move on to the next trade. So why the lack of discipline now?
Firstly, it’s only a small £2 bet and although it’s aggravating, the losses aren’t bad enough to worry me. Secondly, my overall position is hugely biased to the long side. My trading account has option positions exposed to a large fall in the market, and my ISA and SIPP accounts both contain shares which would suffer in another sell-off. So against all that lot a £2 short bet in these markets is fine with me. And thirdly, in addition to the weekly oil supply figures this afternoon there’s a whole smorgassboard of US earnings out over the next two days. Now the risk is that the majority beat the very low consensus forecasts, and if the equity wind gets too strong I’m not going to stand there and spit into it. But there’s also a risk that a few real shockers spoil the party, so I’m happy to have a bit of insurance on board and review the situation afterwards.
When I cut my position for a £500 loss that’ll be the lesson to new traders of why you should trade with a pre-set stop loss!
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At 5441 my running loss is £272; yesterday I made £361 profit on a forex trade. The trigger for selling GBPUSD in a tenner was comments from one of the Fed guys. Federal Reserve member Plosser argued for a rise in US rates sooner, rather than later, which seemed as good a reason as any to back the Greenback. I sold GBPUSD at $2.0025, with a stop loss at $2.0080. I’m not sure which was chicken and which was egg, but the falling oil prices and rising Dollar spurred each other on. After closing half my bet at $2.0012 I ran the trade lower with a trailing stop at a safe distance. Taking profits along the way I was stopped out on my final £1 after this morning’s MPC minutes.
After the MPC minutes raised the likelihood of a rate rise in August I placed a £10 buy bet in GBPUSD at $1.9946, with my stop loss just below the recent lows at $1.9895. Since then I’ve closed half my bet at $1.9958 for a £60 profit and brought my stop loss up to $1.9947.
Gold’s now crashed back below support at $950-55 so hearty congratulations to the traders that backed that sell-off. After the recent collapse in oil prices attention will be on this afternoon’s oil supply figures, and more importantly, how the market reacts to them.
I’m off for a 20-minute meeting with the blue tits in the very sunny back garden.
Happy Trading
July 23rd, 2008 at 1:14 pm
Hmmm. Trading without a defined stop loss is rock and roll suicide. I think young, old and new traders it should be written in stone. Right now having no position is also a real position. Please, please remember to trade with stop losses. I guess in your case you have a varied portfolio but for many new spreadtraders it will mean a wipeout. Just my thoughts. Pwee
July 23rd, 2008 at 1:25 pm
Hi Pwee,
you’re absolutely right and it’s a point I regularly make to new traders. If I’d been really smart (or disciplined) I’d have gone flat for about -£50 quid yesterday. But I know I’d have re-opened a short again so I’m sort of running with it. I guess I’m just playing with a wider stop loss than normal because I don’t trust my timing to sell when the next financial bombshell hits. My bigger fear than losing a few hundred is an overnight wipeout when I’m tucked up with the missus. Yes, in which case why don’t I buy some put options? Because they’re expensive cover at the moment. Hmmm
Are you trading at all at the moment or waiting for a clearer picture?
July 23rd, 2008 at 2:12 pm
Interesting; the Nigerian Militants Hedge Fund tried to give the oil price a boost with talk that they were planning somw moew disruptions of an unpleasant kind. But hardly a ripple in the price.
I’d like to see how the market reacts to a large shortfall in supply as i think that will tell us more about the state of the market.
July 23rd, 2008 at 3:15 pm
Whoo hoo! Gold!!
July 23rd, 2008 at 3:55 pm
Phew, get a load of this; got out of my short on oil at 15:33pm…look what happened next. That was me out of the game, i live to fight another day though. Hurrah!
July 23rd, 2008 at 5:11 pm
aaron-there are US weekly oil inventory data numbers released on Weds at 1535 (-I think Mr. FT referred to them above and in his excellent V&O articles on oil) so your timing was inspired!
July 23rd, 2008 at 6:09 pm
ummm, i forgot all about those GG. Oppps.
July 24th, 2008 at 1:42 am
HI FT
nightmare day! short all of the f*ings index’s, long gold, long oil down worst I can ever remember - even the little side punts to get a couple of quid seemed to be down about 100+ after about five minutes - so a bit like Wellington at Waterloo decided to pull all positions and take on the DOW near the 11700 mark, like the poker player it was the “all in” or nothing scenario - the reason I am still posting means I managed to land about 4 big hits in sucession and have just about got myself out of the mire - I do not recommend this to anybody! but in this game if you hit a winning streak stay with it
July 24th, 2008 at 7:42 am
Hi Simon
Time to assess your trading strategy. Those last trades seemed to have an air of desperation, or in other words gambling. I know, i’ve been there.
GP
July 24th, 2008 at 7:49 am
Morning Simon,
glad you managed to end the day on a better note. Must admit I take the opposite action; if I hit 3 losing trades in a row I take the hint that either I’m not in touch with the markets or that I’ve offended the trading gods. I pack up trading for the day and go to the gym/ sunny garden/missus…