Our system has been developed over the last ten years, and is trend-following in nature.
The basic objective is to capture price movements that may last several days to possibly weeks or even months in individual equities. Ideally, the longer in duration, the more profitable the trade as there would be a larger trend. We aim to minimise trading losses and maximise trading profits. Trades where price movement fails to act as anticipated are cut short (sometimes on the day that the trade is opened) therefore not tying capital up in non-performing trades. This also keeps losses to an absolute minimum.
The system has clearly defined rules as regards stop placement, as well as to risk control. Stops are NEVER moved further away once a position is open, and are only moved up to lock in profits periodically on a position in strict accordance with the system rules.
Our trades are generally aligned with the current trend in the general market indices, however we occasionally make some trades counter-trend to the general market. All trades placed in individual equities are in accordance with the trend in that stock.
The basic system has been proven to work over many years, both in backtesting and also based on historical trades and performance as logged in the public domain. In addition similar analysis on the general market indices has ensured that we have been positioned correctly both during the sharp drop in 2008, as well as the subsequent rally starting in late March 2009. More recently, the market uptrend in early 2013 has provided plenty of opportunities on the long side.
Of course, as with all systems, there is no holy grail. No system is 100% successful. With a trend following system, a 50% success rate would be considered exceptional. Even a 30% success rate should provide more than satisfactory performance. The key is to keep the losses small (by using stops and suitable money management rules) and to let profits run.
In a way, strictly following our system will be boring – in order to achieve the results comparable to those stated in our performance logs, the rules should be followed, no questions asked. We do not worry about intra-day fluctuations, such as market noise made by announcements or news events, and look at the broader picture. Our own trading and stock selection performance has proven the methods. Experience has also shown that 'overriding' the rules has resulted in lost profits. Therefore, if it's an adrenaline kick you're after, or the 'buzz' of trading the markets, you are looking at the wrong website.
We are aware that each trader has their approach in terms of risk. The performance statistics recorded on this blog are based on a hypothtical opening equity, and by then following the position sizing and system rules detailed in my e-book. All these trades are recorded in 'real-time' on the protected Twitter feed @TraderSteveUK (requires signing up to the mentoring programme for access).
The performance statistics are only provided as a guide to the possible returns - there are plenty of opportunities in the right market conditions (on a daily basis) and therefore other traders may select other stocks to trade.