Friday, August 09, 2013

Another winning trend comes to an end

Today saw the closure of the long position in US stock Applied Micro Circuits Corp ($AMCC) which yielded another +6.5R in profits (chart below). The price consolidation, coupled with the contraction in volatility, was the key to the set up traded in mid-June. From there, it was simply a question of updating the stop per the system rules. A lot of profit from not a lot of work!

Of course, half the time or more I end up with losing trades, however those losses are kept to an absolute minimum. Only if there is an adverse gap through a stop level do I take a loss bigger than my initial risk. By doing this, my profit factor (size of average wins against size of average losses) averages out at more than 3:1.

There is a continual turnover of positions - those where the trends remain intact are kept open. Those where the initial signal fails, together with those trends that have finally exhausted themselves are closed. There is no sentiment attached to any position - when a trade is closed, it is simply recorded in my trading log, my position size for future trades re-calculated, and I move on.

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