Trading Trail #21: Not the Buying or the Selling, but the Waiting

Legendary trader Jesse Livermore was quoted as saying:

“Throughout all my years of investing I’ve found that the big money was never made in the buying or the selling. The big money was made in the waiting.”

While I’m not comparing myself with Livermore — I wish, although he did shoot himself — it does seem as though in my Trading Trail account I’ve been doing more waiting than buying or selling.

In part this is merely an illusion, because I’m not documenting every single twist and turn here. In part it’s true, because, after the initial flurry of activity to establish a core portfolio, things have now settled down somewhat.

When it comes to buying, I’m waiting for good opportunities like the one presented by Michael Page (recruitment firm) the other day. The price plunged some 15% on Monday, so I bought in at a lowish gapped-down price of 319.9p. As a relatively high-priced stock (in this account) I didn’t want to suffer a potential loss of more than £300, or even a fraction of that, so I applied a guaranteed stop order. The stop distance was necessarily wide (because of the guarantee), but as the price rebounded upwards I managed to trail the guaranteed stop order up to near break-even at 319.1. I can now lose only £0.80 plus the £3.20 it cost me to guaranteed the stop, so it’s rather reminiscent of the position that I ran in Admiral Group which I told you about earlier and which in the end netted me a nice little profit.

Actually, I had had another go at catching the Michael Page falling knife on Monday, which netted me £0.30 profit before I embarked on my second (and current) adventure with it.

When it comes to selling, I hardly ever do so manually — except to sell short, and then rarely — and I let my stop orders take care of the selling.

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