Robbie Burns’ aka The Naked Trader – September Diary

So, the best law in trading worked in August. Yes you guessed it – Sod’s law. Last August was horrible so this one was bound to be good, right?

This month I’d like to talk about averaging up. Okay with you? No? Well, tough, go and read about shorting instead and see if I care!

A lot of traders make, what I think is, a big mistake of ‘averaging down’, i.e. you bought something, it’s gone down, so you buy more now hoping at least to
breakeven. It goes down some more and you repeat this same thing ending up with a massive loss.

Averaging up is what has made me a lot of money over the years. Averaging up is buying something then carry on adding to it as it goes up.

I know there are some commentators/writers, whatever, who suggest never to let one position grow to more than a certain percentage of your total pot. I don’t agree – so there! And I’ve got the trading balance to prove it!

I’m quite happy to let big positions in spreadbets build up if I have one that carries on producing good news.

Dialight is one that springs to mind, first bought as a spreadbet at 150, I added all the way up in the 200s, 300s and, right up to the current price of around a tenner. I think it probably has further to go so I don’t rule out getting more. Spreadbet profits in this are up and over the £100,000 mark — not to be sniffed at.

Another is Carclo, bought in the early 100s, I added as it went up and that’s now around a fiver.

An example would be Sepura which I bought this month on a rolling bet. At the time of writing I’m up about 7 points and now considering my first ‘average up’. However, if I’d bought it and it was now down 7 points, I suspect I would simply have already taken a small loss.

If it carries on rising, I expect I will continue to average up. However, of course, if question marks should appear I would start to exit.

Of course, averaging up or taking quick losses doesn’t work for everything. After all, sometimes I’m not sure.

So remember last month’s mag I took you through one trade? You don’t? Course you don’t, but if you want you’ll find it in last month’s issue.

As reported last time, I bought at around 325, targeting somewhere near 400. I’m up nearly a grand at the mo. I am going to carry on following the plan. If it carries on going up, I may well average up, especially if it heads though the 400 mark.

If it starts to sink, I could maybe sell half and wait and see about the rest.

Anyways, September is on the way (can you believe it?!) and usually time to be a bit cautious, especially as it’s been a good summer. If things start to sink, what better route than spreadbetting to take advantage, because
we can go short.

September can be a stinker. Fund managers are back from the beach and they might want to take profits, Euro troubles are still there, make no mistake about that, and do remember Sod’s law… It’s best to follow the trend of the market and take an open view.

Article reproduced from the September edition of Spread Betting eMagazine