Saturday, May 16, 2015

A couple of recent trades

Below are the charts for the two most recent trades that have been closed, both for a profit. I have highlighted the relevant entry and exit points.

First to go was Nordic American Tankers, and we can see price fell quite a way below my exit point before recovering back in recent days to around the level where I was stopped out. Once a trade is exited, subsequent price action is of no concern to me - I move onto other opportunities.

This other position was in McDermott International, in which the exit signal was given this week There was a minor bit of slippage suffered as price fell sharply on the opening bell the day after earnings were released.

Again, here we can see that, once the stop had been hit, price has continued to fall. While I am always aware of the possibility of a price gap against me, my parameters do a good job more often than not of getting me out of a trade while allowing me to keep the bulk of my profits.
In both these cases I knew nothing about the company, or the current state of the company based on fundamental analysis. All I did for identify suitable entry points for each trade, and stayed with them until the trailing stops were hit. This resulted is a combined profit over the two trades of +5.86R. A decent return for not a lot of work.

It is important to remember that, with a trend following style approach, you will end up with far more losing trades than winners. My win ratio shows that I am profitable on only a third of all my trades. But, when I do win, the average profit is significantly bigger than the average loss. 

This gives me the overall positive expectancy. But, to do this, and as can be seen here, you have to keep the losses as small as possible. This is so that, when profitable trades do come along, they can cover a whole bunch of those losing trades and occasionally leave some profits left over increasing my equity.

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