Two trades close out for a whopping 45% profit!

Oh yes, I am a trading god! At least, that's what it is easy to think when I make profitable trades! There is a very good reason why I am not a trading god, and that is because of the mistakes and losses that I make - but more about that later in this post.

In the past 24 hours, two of my long-term trades have closed out due to falling throigh their trailing stop-loss levels. This has resulted in the trades closing and netting me a profit. These trades were both long trades - buys - of shares: American Express and Mastercard. I had loose trailing stops for quite a long time, but more recently tightened the stops up as I felt the markets became more wobbly, and likely to fall. The closing trades netted me $2649 and $1898 respectively. This is a 45% gain for American Express in just short of three years and a 47% gain for Mastercard in less than two years.

2014 10 02 AXP


These two trades do not appear on my trading log because they were opened before I started this blog. This type of trading is not exciting day-to-day trading, but a 45% gain in 2-3 yrs is pretty good in most peoples book.

2014 10 02 MA

The flip side to  these trades closing out profitably by dropping through their stop losses is that my long trade of a couple of weeks ago - XLF - has also been closed out. XLF is an ETF of American financial stocks. I purchased a long-dated call option on XLF and put a 50% trailing stop on it. If the price of the option drops below 50% of its maximum, the option gets sold - which is what happened - damm it! Whether or not to put a stop-loss on an option before it has moved into profit I cannot say at this stage. The good thing about options is that the downside is limited to the value of the option. It may be best for me to wait until the option is in profit before attaching a trailing stop loss. The trick then is to ensure that my initial investment in the option is not too great, and that I do not worry about the option value plunging in price, magnifying the volatility of the share price. Will XLF rise again to the stage where I would have made a handsome profit if I had not been stopped out? Only time will tell. Anyway, my plan is to not put stops on my option trade until they are in profit. If I follow this route, I will also have to limit the amount of overall portfolio risk that I take on.

Other trades that have closed - making me losses, include Aluminium and Industrial Metals. You can see from their graphs that there was a point on both long trades, that the positions were well in profit. With the benefit of hindsight, I should have moved their stop-losses to breakeven at those points. You can see on the graphs where I mean.  I had kept the stop losses quite loose, because the instruments are quite volatile....  However, I am still interested in these commodities, because they do represent good value at present. Instead of trading them as spread-bets, it may be better to buy the ETFs outright and hold them through thick and thin, looking for an eventual upturn. This is my strategy with Teucrium Corn ETF, (and mighty painful it currently is too), but I am optimistic that its day will come, because we all have to eat.....

My long Brazil ETF also closed a week ago due to dropping down through its trailing stop. This trade netted me a modest profit, which you can see on the graph. I had used a tight stop-loss (PSAR) for this trade, because I could see that historically this seemed to work best. This was fortunate, as Brazil has plunged much further during this past week, and I would have been nursing losses on this trade had I used a different technique. Members of my site will have access to my videos that discuss stop losses.

As ever, these are thoughts about what I do, and should not be taken as financial advice to you. If in doubt, have a look at my disclaimer.



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