Donald Rumsfeld, Paul Tudor Jones, Facebook and Twitter

“I don't risk significant money in front of key reports, since that is gambling, not trading." - Paul Tudor Jones

When you are trading, the only elements you can control is when to enter a position, where you place your initial stop, your position size and the amount you are willing to risk.

Once you are in a trade, you have no influence over what will happen - the market (being other buyers and sellers) will determine future price direction, and consequently whether your position goes into profit or a loss.

You of course do have control over where you place your initial or trailing stop, but you do not always get out at those prices - particularly if you end up on the receiving end of a price shock and a resultant gap against you. As a result, there is always a risk that you can lose more than your initial risk on any trade.

Earnings releases are, in Rumsfeld-speak, a "known unknown". We know when they will occur, but we cannot predict or quantify their effect on price. Therefore, there is always potential downside risk attached to them. Some announcements may see price move in your favour, others can go against you.

This week we have seen two big-cap Nasdaq stocks suffer large price gaps following earnings releases. The charts of Facebook and Twitter are below.

The rules of the game haven't changed

I started getting involved in trading back in 2003, and didn't get into trend following until 2006. As a result, I missed the huge trends (both up and down) from the dot.com bubble around the millennium.

While thinking idly back to those times, which are now getting on for 20 years ago (yikes!), I began pondering about how things have changed in the intervening period.

Back then, Facebook and Twitter didn't exist. The dot.com bubble sprang from something new to the masses called the internet. Mobile phones were nowhere near as common as they are today.

How on earth did we survive?

And that got me thinking, from a trading and historical viewpoint.

New testimonial from down under

Daniel is a trader based in Australia who has just completed his year within the mentoring programme. He was kind enough to forward the following short testimonial:

"Wow a year has past already! Thanks a lot Steve for the past 12 months, whilst I have a long way to go it has given me an excellent grounding of what I need to do/become as a trader. If your intention with the program is to teach traders to fish I think I'm well on my way and and good to continue on my own now (I hope!).

I really appreciate all the work you've put into the program, and the assistance you've given me and the rest of the group. It is especially great to chat with the others on twitter.

New testimonial

I recently had the pleasure of meeting Fisayo, who was kind enough to forward the following:

"I am not based in the UK but was in the country recently for a vacation. I am a trader/portfolio manager based in Africa but still love to network with traders all over the world - as they say - you never grow old if you keep learning!

Real time performance log tracker

I have now added a sidebar to the blog summarising the performance of the trades I have called in 'real-time' via the protected Twitter feed. This will be updated regularly.

The results achieved are very consistent across these two periods. The expectancy per trade (+0.53R) is the same, and the win percentage is almost identical (49% in the 2010-11 period, 50% in July 2012 onwards). The only difference, which accounts for the increase in the projected annualised performance, is that the average holding length of each trade has shortened from 5 weeks to 4 weeks.  This may change going forward, and will automatically affect the calculation of the projected annualised returns as a result. The other parameters affecting the risk per trade and position limits in both periods are the same

A couple of nice US trades

Here's a couple of US positions called and taken via the protected Twitter feed which have worked out nicely, with the profits now at several times of what was initially risked. These again set up perfectly in accordance with the criteria we look for, both on the chart and the contraction in volatility prior to the signal being taken.as well as the 'visual' element. These trades will continue to run until the exit signal is given.

Protected Twitter feed performance

Despite the rather languid level of market activity recently, there have been plenty of trends in stocks to profit from.

Since the protected Twitter feed started in mid-July, the entries disclosed (all given in real time) have generated a cumulative return of more than +18R, despite not even being half way to fully invested, as per my position limits (I am only counting new positions opened since that point in time). Currently I have a mixture of long and short positions in stocks from the UK, US, Germany, Italy and Spain.

Another nice trend - from Italy!

Followers on the protected Twitter feed were alerted to my entering a long position on this Italian stock, which gave an entry signal last Thursday. According to my listings on IG, this was the highest percentage mover in Italy today.

Supergroup

I mentioned earlier this week on the protected Twitter feed that UK stock Supergroup came up on the scan results and looked like a good set up for a long position (refer to chart below).

Calling my own trades on Twitter

As from Monday 09 July I will be calling any new positions or set ups via a new protected Twitter feed @TraderSteveUK. These will be called in 'real time' and will give entry price, initial stop levels, and what expiry spreadbet I am taking.