Trading Trail #7: Trading UK Equities
Nov 8, 2011 at 5:38 pm in Trading Diary by
Don’t forget the DISCLAIMER.
You’ve probably noticed that so far I have established only UK (and one Irish) equity positions in my account — no indexes, commodities or forex currency pairs. While I reserve the right to speculate on those too, I’m in no rush to do so. Although my preferred position trading approach should be applicable to any financial instrument that has a fluctuating (ideally trending) price, right now I have the matter of money management and risk to consider.
I’ve mentioned before that I can stay within my £10 (1% of £1000) risk per trade by staking £1-per-point on a 10p stock with no stop order in place. Or, I can stake £1-per-point on a 100p stock with a stop order at 90p (-10%). In contrast: on a 5000p index my money management criteria would require me to place a stop order at a fraction of 1% below my entry price (with a good chance of stopping out for no good reason), or to place a fractional bet of less than £1-per-point (which this platform does not allow).
It’s a similar story with commodities and foreign (e.g. US) shares, which are simply too expensive for me to trade right now in this account. If the account balance grows, of if I’m “dead sure” of which way a higher-priced instrument will go, I might be tempted.
There are a few more reasons why I’m focusing on UK equities at the moment:
- My strategy relies on diversification — cast out lots of seeds, and see which ones grow — and there just happen to be more equities to choose from than there are indexes, commodities or currencies.
- I understand equities, and I think they will be more familiar to first-time spread bettor readers who have thus far only ever though about “buying shares”.
- Whenever you get a message from a spread betting company in your inbox, offering you a sign-up bonus if you open an account and meet certain eligibility criteria on which initial trades you need to place, it usually states that eligibility “excludes equity trades” — as though the spread betting company doesn’t really want you to trade equities. For me, that’s a good reason to do so!
Today’s Trading
Today I raised my stop order on Mothercare to break-even at 148p; so it’s no longer risky unless the price gaps through my non-guaranteed stop order.
Remember my Short Opening Order on Homeserve? The price fell, as I thought it would, but without first rising to my preferred short entry price. I missed that particular boat, so today I did an about-turn by removing my short opening order and creating a new long opening order to buy at 263p with a stop order at 253p. I hope Mr. Market isn’t listening!
I don’t want to steal my own thunder before the end of the week, but today I can report that at close of play today this trading account is currently (just about) in profit.
Tony Loton is a private trader, and author of the book “Stop Orders” published by Harriman House.