None of the trades I make in this account is a recommendation, so periodically I will remind you to read this website’s disclaimer.
Today I pyramided an additional £1-per-point into my Thomas Cook position. At the time of writing, my existing position that was established at 11p is showing a profit of £2.80 which isn’t enough profit — and certainly not enough “locked in” profit — to justify the pyramiding when you consider that my new position established at 13.9p has increased my risk by £12.90 (because of a stop order at 1).
So why did I do it?
Well, apart from the fact that there is massively more upside potential than downside potential in this share price, in the sense that it can go up further than it can go down, in a strange way I am actually taking less risk than I was when I last “averaged down” this stock.
As explained in my Continuing Story of Thomas Cook, my first ever position (in this account) in Thomas Cook was established at 20p, with a second one “averaged down” at 11p. The 20p position stopped-out at break-even for no loss and no gain, leaving just the 11p position in play. By going back up to two positions (at 11p and 13.9) in place of my original two positions (at 20p and 11p) I have reduced my averaged purchase price from 15.5p to 12.45p.
Maybe all of the Thomas Cook bad news is out of the way now, eh, but I wouldn’t count on it!
Standing on the Shoulders of Giants
Some days ago I noticed that another well-known trading author had posted one of his trades on his web site. I decided that I would take the same trade if I could do so at a similar price to his; so I placed an opening order to buy into Afren if I could do so at 79p. Is this plagiarism (does that even exist in trading?) or merely Standing on the Shoulders of Giants? And what if this giant topples now that I’m on his shoulders?
Anyway, the order triggered this morning, which took me into position on Afren at £1-per-point and gave me the problem of…
Negative Trading Resources
Don’t panic; I haven’t lost all the money in this account – yet! But my available Trading Resources did go negative, which put me in danger of not having sufficient funds to pay ongoing rolling charges.
The solution was to raise some of my not-yet-at-break-even stop orders to lessen my risk and free up some trading funds without closing any positions. It’s something I had started doing anyway once I became almost spent up. Stop orders at 0.1p (which is effectively no stop order at all) on some positions is a luxury that I can’t afford right now.
Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.
Tags: trading commentary
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Trading Trail #23: Pyramiding Thomas Cook, and Standing on the Shoulders of Giants
Dec 14, 2011 at 4:49 pm in Trading Diary by
None of the trades I make in this account is a recommendation, so periodically I will remind you to read this website’s disclaimer.
Today I pyramided an additional £1-per-point into my Thomas Cook position. At the time of writing, my existing position that was established at 11p is showing a profit of £2.80 which isn’t enough profit — and certainly not enough “locked in” profit — to justify the pyramiding when you consider that my new position established at 13.9p has increased my risk by £12.90 (because of a stop order at 1).
So why did I do it?
Well, apart from the fact that there is massively more upside potential than downside potential in this share price, in the sense that it can go up further than it can go down, in a strange way I am actually taking less risk than I was when I last “averaged down” this stock.
As explained in my Continuing Story of Thomas Cook, my first ever position (in this account) in Thomas Cook was established at 20p, with a second one “averaged down” at 11p. The 20p position stopped-out at break-even for no loss and no gain, leaving just the 11p position in play. By going back up to two positions (at 11p and 13.9) in place of my original two positions (at 20p and 11p) I have reduced my averaged purchase price from 15.5p to 12.45p.
Maybe all of the Thomas Cook bad news is out of the way now, eh, but I wouldn’t count on it!
Standing on the Shoulders of Giants
Some days ago I noticed that another well-known trading author had posted one of his trades on his web site. I decided that I would take the same trade if I could do so at a similar price to his; so I placed an opening order to buy into Afren if I could do so at 79p. Is this plagiarism (does that even exist in trading?) or merely Standing on the Shoulders of Giants? And what if this giant topples now that I’m on his shoulders?
Anyway, the order triggered this morning, which took me into position on Afren at £1-per-point and gave me the problem of…
Negative Trading Resources
Don’t panic; I haven’t lost all the money in this account – yet! But my available Trading Resources did go negative, which put me in danger of not having sufficient funds to pay ongoing rolling charges.
The solution was to raise some of my not-yet-at-break-even stop orders to lessen my risk and free up some trading funds without closing any positions. It’s something I had started doing anyway once I became almost spent up. Stop orders at 0.1p (which is effectively no stop order at all) on some positions is a luxury that I can’t afford right now.
Tony Loton is a private trader, and author of the book “Position Trading” (Second Edition) published by LOTONtech.
Tags: trading commentary