Gulf Keystone Petroleum

I tried this particular stock from the long side back in July, which I was stopped out of pretty quick. After getting a signal just over a week ago I opened a short position which is now in profit. Again, a trend follower should be comfortable in trading in both directions. Providing there is a trend signal given, then that is the green light to enter a trade and see what occurs. And if we are wrong, then our risk control will take us out of the position with minimal damage to our portfolio.

Gulf Keystone Petroleum - the end of the road (for this trade)

Today I got an exit signal on Gulf Keystone Petroleum - a combination of the downdraft in the general market and a news release means that this long signal failed. Such is life. In the overall scheme of things a losing trade makes a (small) dent in my capital, but on the positive side it brings me one trade nearer a big winner...

Gulf Keystone Petroleum setting up

Popular with investors and traders, Gulf Keystone Petroleum has consolidated nicely over the last few days following a sharp bounce out of the profitable downtrend. I'm perfectly comfortable in switching sides from the short side to the long side like in this case - I'm just following the price action.

Gulf Keystone Petroleum (again)

An update on this particular stock, and this is a great example of showing how you must heed the signals and exit your positions when the stop levels are hit. If you don't, then your hard earned profits, which could have taken several weeks to accumulate, can easily disappear in a couple of days.

Gulf Keystone Petroleum

This chart of UK stock Gulf Keystone Petroleum is a great example showing the full spectrum of trend following. To begin with, some failed breakouts (in both directions) until in early November a long signal that heralded the start of a pronounced uptrend, which would have generated nice profits. This stopped very suddenly before reversing and giving a short signal at the beginning of March, which is still working.

That early period would have tested both a traders' risk management and psychology, in that those 'false starts' would have caused losses and may have planted a seed of doubt as to whether the system works, whether trend following is for you, etc.

If you had been buying and holding from say September/October, you would been sitting in that position for several months now with a small gain to show for it. In the meantime, despite that initial whipsawing, trend followers would have come out well ahead as a result on both long AND short signals.

To a degree all this boils down to your personality. I myself would find it extremely difficult to be holding on for several weeks or months showing very little return or loss. On the other extreme, I do not have the personality to trade on an intra-day or short term basis. The trend following method I use is my 'happy medium' and the trading style that I am most comfortable with, and at the end of the day, it is THAT which will determine whether you have true belief in the system and the signals it generates.