I started the diary of a DIY Investor for the magazine in May 2014, using £50k of my own money reporting each time I made a move.
I invested and traded the AIM and Small Cap end of the market using fundamental analysis, the intention being to make a total return of 20% a year including dividends. I failed.
Thinking back, 2014 brings tears to my eyes, 2015 was good and the first part of 2016 was OK.........................................but then I hit a brick wall.
The wall was called Brexit, post the referendum I found it impossible to value the small companies I focused on as there are simply too many imponderables. Until we know exactly what trade deals we as a country can cut not just with the EU but also with the rest of the world, no company can give meaningful guidance to the markets.
My view was that if I can't value something I don't know what I should pay for it and if I don't know what to pay for something why should I buy it. So with something of a heavy heart I gave up.
However, one of the great things about the market is that there are many ways to play it. In September of 2016 I relaunched the portfolio, this time with £100K of my capital, Swing Trading mainly the Large Caps, but also the Indices and Commodities.
What I do is take large (relative to the capital in the portfolio) very short term positions, at a time when I judge there is unlikely to be any specific negative news flow, using charts to time my entry and exit points. The reasons for trading only the large liquid markets are cost and ease of access. I can buy or sell £20k in one of the FTSE 100 companies in a flash without affecting the price at all and with low cost. Trying to do the same thing with one of the tiddlers is dangerous, expensive and all but impossible.
Using level two price data and short term charts set to show both volume and the open, the high, the low and the close I watch for momentum building up in something and when I think I have, I buy looking to hitch a ride on it, selling out and jumping off when the upward move weakens. In other words trying to catch the swing.
It's a widely held belief that it’s impossible to time the markets, but as the legendary trader from a hundred years ago Jessie Livermore once said 'no man can beat the market, but he can beat an individual share' and this is exactly where I'm coming from. I do believe that if I exercise rigid discipline and only trade when conditions are in my favour I will beat individual shares more often than they beat me.
Swing trading as I practise it is a percentage play, no more, no less. I have to win slightly more trades than I lose and my winnings have to be greater than my losses and if I achieve that I make money.
So how has it gone since the end of September? The short answer is very well indeed, I've had eleven winning trades and seven losing ones; the profit minus the losses totals £3251.
My three best trades were Petrofac Ltd two trades total profit £1478, The AA Ltd + £886 and Scapa Group Plc + £925, my three worst ones were Highland Gold Mining Ltd a loss of £413, Dignity Plc - £361 and Auto Trader Group Plc - £377.
£3251 is not a life changing sum of money in itself, but generated by £100k of capital in three months it extrapolates to an annual capital gain of 13% which isn't bad. Currently I've no positions open and I'm in no great rush to do anything for the sake of it. Right now I'm watching and waiting for suitable opportunities to present themselves as I'm sure they will.
I'll report all I do in 2017 both here in the magazine and in almost real time on www.diyinvestor.net - wish me luch as I wich you luck in navigating your portfolio through choppy waters ahead.
Thursday 19th January
Running total £2903 + £6 (!) = £2909.
I wrote on Monday about my respect for the banking industry. Note I don't call it a profession. Well I've got even less now, my plan was to ram raid The Royal Bank of Scotland PLC (RBS) aiming to take £700/£800 off them if I was right and give up £350/£400 if I was wrong.
Four days later I honestly don't know if my basic call was right or wrong, but what I do know is that the price isn't performing as I thought it would in the very short term. I thought I'd spotted a pivot point and that the price would rise sharply ahead of next week's figures and then carry on rising. The first part of my theory hasn't happened as yet, so to use a phrase 'I'm out'.
After all the costs I made £6 profit, what a total waste of time. Mind you it could have been worse; I could have lost the £400.
Viewed like that I suppose it’s a brilliant result.
Monday 16th January
Running total £2903
As per my system I looked in some detail over the weekend at what Mr Market had been up to last Friday and decided I liked the look of The Royal Bank of Scotland PLC (RBS).
Well, that's not quite true, I've no time whatsoever for bankers (remember what rhymes with banker?) but whilst I don't like the underlying state of their business I do feel the share price is pivoting round after a recent fall and therefore worth a short term speculative investment.
The limit order at 221p was met just after the opening bell this morning, it’s now roughly a 50/50 call whether I lose £350/£400 or make £700/£800
Thursday 12th January: £ - 348!
Running total £2903
I don't think I've ever bought a share that went wrong as quickly for me as yesterday's purchase of Standard Life Plc (SL.).
It rose very briefly after the opening bell, then reversed and fell steadily for the rest of the day throwing my money out of the window as it went. Taking losses quickly and without having to lie down in the dark crying into my hankie is very much part of the swing trading I now do.
This trade is good example of what happens when you get the timing wrong with the swings, the momentum I thought I'd seen building up on Tuesday clearly wasn't there on Wednesday and so earlier today I sold for a loss of £348. DUH.
Wednesday 11th January
Normally Simon my trading partner and I work through our charts independently each evening and then make contact via email and ping our thoughts back and forth. Its a great system, because we come at what we do from very slightly different angles and often one of us sees something the other missed.
Last night we decided to meet up and run through our watch list together while we had a bite to eat in a pub. Now trust me on this, if you meet in a pub to talk about putting quite chunky money into anything................................don't touch booze till you've done all the business. We didn't.
We sat in this fabulous, rather posh old pub miles out in the country, with a couple of hundred bottles of wine on a rack a few yards from our table, drinking tea. The power of will power. (As a side issue, I'm not put on earth to promote other people's business's but The Woolpack Inn at Warehorne near Ashford in Kent is a truly great pub, if your down that way, its well worth a visit. www.woolpackinnwarehorne.com)
Am I multitalented or what? I'll be writing a pub guide as well as a Private Investor Diary soon. Back to business, after a lot of discussion we decided to both buy Standard Life PLC (SL.).
I bought in the usual way by placing a limit order with the broker at 360.5p, I'll take half my profit at 372p the other half at 380p and will call time (did you get that) at 354p if it disobeys me and goes rogue.