Market Watch – A mixed week with defence being the best form of attack

With markets losing conviction this week as February draws to an end, capital preservation became the order of the day and we look back at the trades taken and how we managed them to ensure we protected those hard earned profits.

 

We also take a look at the FTSE100 which looks very interesting for another strong turn. Will it contribute more profits? Its behaviour so far would suggest so.

2 Comments

  • David

    Got the ‘New Market Wizards’ book! Only on the 1st interview but it is good. Still unsure about your ‘2 position strategy’. You open two identical positions then when one hits 1% profit is that simply closed? You do mention ‘banked’ so I’m guessing you close it?
    Then on you 2nd position do you move it upto break even at the same time as you close the other one? Obviously don’t go mental and be too keen give them some room to breath. Am I understanding the process or have I got something wrong??

    Reply
    • Tom

      Hello David

      Thanks for the note and brilliant to hear you purchased the NMW book. Excellent decision!

      Regarding the positions, it goes as follows:

      Take your full risk. Let’s assume we want to risk a max of 1% of our capital on a single trade. I therefore split the 1% into 2 x 0.5%. The first 0.5% goes onto the first trade and this has an entry, stop and target (target is set at 1% profit). When 1% is hit the profit is automatically banked by your broker. The second 0.5% however has the same entry, same stop but has NO target. We will move our stop to break even on this second trade, when the first trade has hit target. Then I continue to manage the second trade accordingly.

      Leaving the trade to move 1% before trailing is what I call ‘giving the trade room to breathe’. What we don’t want to do is move the stop when the trade has only moved 10pips…this is going to get caught by the natural cycles that occur in the markets throughout the trading day.

      Best
      Tom

      Reply

Post A Comment