Trading Trail #37: Game Over?

Don’t Panic! When I say “Game Over”, I don’t mean in terms of my trading trail portfolio. Although it turned down this week, to sit below the normalised FTSE 100 and FTSE 250 indices (see latest equity curve below), the portfolio value is still ‘above water’ at £1033.

They (whoever they are) say that “the course of true love never runs smooth”. That’s certainly true of the financial markets, and true of my longer-term trading-cum-investment “position trading” strategy too. It’s not my only strategy, by the way, but it’s the strategy for which I’m documenting the progress in this “trading trail” series.

Anyway, my headline “Game Over” refers to a headline in this week’s Sunday Times newspaper reporting that it may be “Game Over” for Game Group. According to the report, the company has put itself up for sale in an attempt to stave off a pre-pack administration that would wipe out investors.

It’s relevant to my trading trail portfolio because of the two £1-per-point positions I had established at 18.6p and 12.8p respectively. If Game goes to the wall I stand to lose just £31.60, with £24.60 of that loss already reflected in the value of my portfolio. While I’m not shy of taking punts on all-or-nothing recovery plays, it underlines the importance for me of starting small and then building up a substantial stake gradually by pyramiding only when the exiting position(s) go into profit. Pity the poor investors who went all-in for £10,000 worth of shares on Friday in the “hope” of ten-bagging their investments.

Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.