Just chillin' with my trading.....

I try to deliberately take a chilled-out approach to my trading: I like to look at the markets when they are closed and plan what I am going to trade before they open. One trade per week is enough for me to think about, I find. Planning a trade at the weekend is perfect, therefore. But if the markets are closed, how do I open a new long (buying) position?

The answer is that I make an order to open (OTO) a position, if the price of the share or ETF hits a certain position. So the question then is, how do I decide at what price to set my OTO? Just above the recent closing price, or just below the current closing price? If I think that I want to get into the trade at a better (lower) price, then I will set what is called a limit order, below the current close, so that when the price drops down, my order will be triggered and I will be into the trade. In this situation I have set a limit on how much I am prepared to spend. But hang on, wait a moment, in this scenario I am buying a share that is falling in price, is this trend trading? Er, no, not really, I might be buying a share that is falling from its absolute peak!

I like to buy shares that are rising in price. I am a trend-trader. It makes sense, therefore, to set a stop order as my OTO, because, with a stop order, the trigger occurs when the share price rises through the stop.

2015 04 03 Plus 500 stop order

 

I will often pick up possible trades by finding shares that have made new highs. Plus500 made a new high in January this year. If I had set a stop order to buy it the following week, the order would not have been triggered, because the share price fell over successive weeks. If I had done this three times in a row,  the trade would still not have been triggered (blue arrows above). However, on the fourth week, the trade would have been triggered, and I would have been long (bought) Plus 500, at a better, but rising price! The point is, that in order to benefit from this, I have to change the stop price in the order each week, lowering it a little, and not just run the exact same order in successive weeks.

Unfortunately I did not pick up that trade earlier in the year, but, dear reader, you will recall me saying last week that I planned to buy Plus 500. I did indeed set a stop order last week, but it was not triggered, so I am not open in this position. However, I plan to do the same thing this week, setting a stop order, but at a lower price, just above last weeks high,  to attempt to benefit from a pull-back, but only opening the deal if the price is rising.  I will discuss Plus 500 in my videos, until it gets to a point where I am no longer interested in buying it! Mentally, for me, even though I am placing a trade, this is last weeks trade, so I will set another trade for this week.

This weeks trade is to go long (buy) Merlin Entertainments PLC (MERL).

2015 04 03 Merlin

 

Have you ever been to Legoland? Do you remember how many cars there were in the car-park?! Merlin Entertainments is not just Legoland in the UK, but worldwide. It is also Sea Life, Madame Tussauds, The Dungeons, The Eye, Alton Towers, Thorpe Park, Chessington, Warwick Castle. I had no idea, until I looked it the website! One of the things that I like is that these sorts of businesses will, I think, do well whatever the economic climate.

But, as a trend trader, why am I buying MERL?

  • It has made a new high

  • the ma20 is higher than the ma50

  • both mas are rising

  • It looks like its trending upwards over the past six months


I will set a stop order to buy MERL and set my stop loss below the 50ma, and see what happens, and just chill out for the rest of the weekend!

I you are interested on my views of the markets this week then click here (5 mins)

If you are interested in seeing what open positions I currently have, and how they are doing, then click here (9 mins).

Happy Easter!

Comments

Popular posts