Trading Trail #2: From the ‘Stop-Out’ List

Don’t forget the DISCLAIMER.

In my previous posting I told you that I had established new long positions in Mothercare, Man Group, Wolfson Electronics, Home Retail Group, and Enterprise Inns, but I didn’t tell you why.

It’s because my previously held positions in those stocks (in another account) had closed by stopping out some time before, and I could now re-purchase the same stocks in this account at a lower price than the price at which I had last sold them. One of the rules of my position trading approach is that I try never to buy a stock at a higher price than the price at which I last sold it.

At the time of writing, this snapshot tells me that I last stopped out of Game Group at 19.1p and I could now re-purchase the stock at 18.25p. I last stopped out of Hardy Oil & Gas at 159p and I could now re-purchase at 150.25p… so I might. On the other hand, Galliford Try is now 63% more expensive than when I last sold it, and Heritage Oil is almost 10% more expensive, so I’m steering clear.

Necessary, but not Sufficient

So that you don’t get the wrong idea, let me tell you that a favourable re-entry indicated on my Stop-Out List is a necessary condition but not sufficient for me to do the deal. There has to be another reason, like the price chart also looks good or (in this case) because I’m building a new portfolio of longer-term spread bets from scratch.

The Long and Short

I might just as well have named this spreadsheet my Last-Sold List, except that the entries are not necessarily stocks that I last sold. If I held a short position that stopped out, I would use the same spreadsheet to record the high price at which it stopped out, with a view to re-selling (going short again) if the price went even higher. This is why my spreadsheet has a column indicating whether I Want to… go Long or Short, and why the entries in the Open Signal column turn green only in accordance with my preferred re-entry direction.

Latest Trades

This being a trading diary, you’ll now want to know what has happened in the live account. All trades are at £1-per-point unless stated otherwise.

Today’s new entries are Game Group (at 18.6p with a stop order at 0.1p), Findel (at 4.1p with a stop order at 0.1p), Lloyds Banking Group (at 29.4p with a stop order at 24p), and Bloomsbury Publishing (at 98.2p with a stop order at 89p).

I was tempted by St. Modwen Properties, but the 6-point spread was a little too wide for my liking.

Rising prices on two positions have allowed me to raise my stop orders to slight better than break-even on Wolfson Microelectronics and Man Group.

Home Retail Group stopped out for a loss of £4.10 and Mothercare stopped out for a loss of £5.30, so they both go onto the aforementioned “Stop-Out List”.

Tony Loton is a private trader, and author of the book “Stop Orders” published by Harriman House.