My brake parachute worked!

When I was a kid, we used to have loads of brake parachute cord in our garage. My Dad was a Lightning pilot in the 1960s and 70s. The Lightning was one of the fastest aeroplanes in the RAF, and used to have great difficulty slowing down when it landed, so was assisted by the use of a brake parachute. You didn’t want your brake parachute cords to fail, so it was only ever used once, hence the surplus cord that everyone on the squadron ended up using at home for various tasks.  Here is a video of a brake parachute failure!

I thought that today I would tell you about an interesting development in my weekly spread-betting system. In some ways it’s my worst trade of the week, but in many ways it was the best, because my brake parachute cord did not fail!2016-10-29-amec-foster-wheeler

I had a long position in AMEC Foster Wheeler as part of my weekly spread-betting strategy. You can see from the graph where I opened this position. I always have a stop-loss order to close my position if the price goes the wrong way. I use twice the ATR (average-true-range) of the weekly price to form the basis of my stop-loss calculation. This is turn influences the ‘amount per point’ of the trade and fixes the trade risk to 3% of my bank. Once the share price has moved up by the same amount (in £), I am then able to move the stop-loss to the same level at which I entered the trade. This ensures that if the price drops suddenly, that my position will be closed without loss. I imagine the stop-loss to be a bit like the brake parachute on the Lightning - I really want it to work when it’s needed. In this week’s case it did, and the position was closed without any financial loss.

Why did the share price fall dramatically? Apparently there was an announcement about a dividend cut, due to the low oil price. Oh well, thank goodness for brake parachute cord! My other positions are doing pretty well, with this portfolio up nearly £1000 this year. This portfolio has done much better so far, than the daily trading portfolio, which started to rack up losses as the markets consolidated sideways. I have therefore stopped trading daily, and limit myself to weekly trading.

Currently I have the following portfolios running:

  1. Weekly asset allocation with timing (done through a trading ISA) Get a taste of this portfolio in this video.

  2. Weekly spread-betting portfolio (as described above)

  3. Twice-annual asset rebalancing (done through a SIPP)

  4. Annual QVM share purchase portfolio (also done through an ISA)

I am creating literature about these trading systems that I hope will be available soon for those wishing to become members of my site, so that they are able to see the rationale behind my trading as well as knowing exactly what I trade and when I trade it.

If you know anyone who might be interested in what I do, please do encourage them to sign up to my mailing list on the website!


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