The Great British Trade Off

From the start of this tax year 2017/18 we have a new look DIARY OF A DIY INVESTOR.

Humbug who has been writing the column for us since 2014 has been joined by his trading partner Fagin.

They have each opened a real life portfolio with one hundred thousand pounds of their own money and have challenged each other to see who can make the most profit in a year using two variants of the swing trading system they've developed.

Fagin will pick the markets pocket by using the daily signals their system produces to trade a short term time frame of days and weeks.

Humbug will use the weekly signals to trade/invest for weeks, months and possibly the whole year.

Which will prove to be the better way of approaching the current market with all its uncertainties? Will it be Fagin's quickly banked trades or will it be Humbug's longer moves?

This is a fascinating exercise and we're all watching with great interest; the answer will be revealed on April the 5th 2018.

Santa Bounce? No. Trying to create a thoroughbred, Humbug's ended up with a camel - down £4684.93 he's got the hump and is turning to funds

Well I'm extremely glad that Fagin has accepted my long term challenge to run the GREAT BRITISH TRADE OFF not just for this year, but for a number of years thereafter, because if it was a one off competition for this year only I might as well give up now. I came back from sailing a few weeks ago a couple of grand down and then guess what? Ten days after I got back I found myself four and a half grand down.

Laugh? You know what, I thought I'd never start.

I know the market naturally ebbs and flows, but it would have been nice if the shares I picked didn't just ebb.

A number of things to say; whilst, believe it or not, I'm enjoying learning the hard way how to be the investor I want to become, rather than being the trader I've been all my life, clearly I need to begin to get the hang of it sooner rather than later.  My share selection was all in the UK market and whilst I stand by the comments I've made in previous postings about being happy with the way I constructed the overall mix of them to complement each other, I have to face the fact that time and time again the initial price momentum that attracted me to them failed. My difficulty has been to know if this was just that ebb and flow that prices experience or was it the start of a real decline.

Sometimes I've not stopped  losses quickly enough and just threw my money away as things set sail for the south pole and sometimes I've done the exact opposite, stopping out too soon and yeah, just throwing my money away as they reversed back up and then posted the gains I'd been looking for.

 As a trader I'd have welcomed the volatility, as an investor looking for a much larger gain by taking the risk of holding a position for potentially much longer I've made numerous wrong calls.

Oh well, as an experienced trader but very inexperienced investor I just have to accept that it’s all part of the learning curve. After all, private education is never cheap.

The expensive lesson I've learnt in the last few months with individual shares is that you either trade them quickly using a mechanical system as Fagin does so brilliantly, or you really do hold them for the long term. Banking the dividends and taking no notice of where the share price goes. The mistake I've been making since this competition began in April is to have a hybrid model that falls between the two ideas and it doesn't work. 

When in a hole, don't keep digging. I decided to look long and hard at all my individual shares, asking myself the question 'am I prepared to hold this share almost forever, no matter what happens to the price and through any and all difficulties the business encounters?'

Sadly the answer in every case was no, I'm not that confident. Sure I'd bought each one because I liked their current position and with an eye to how they blended together to form a balanced portfolio, but hold through a fifty or sixty percent drawdown? Er, no.

Result being that my broker made money on the commissions as I sold them all, whilst  some of them were well in profit, in total there was a couple of thousand pounds loss, so by selling I converted  a paper loss into an actual one.  Duh! I also closed out my spot gold trade for a loss of £30; it had been in profit at one point but had spent most of its time well under water. Shame, but just one of those things.

In fact the whole experience from April is a shame. My initial plan was to take positions that balanced each other, riding medium term waves and banking profits after a few months of holding. It hasn't worked and the reason may well be because instead of just focusing on a shares momentum I also tried to find candidates that balanced each other.

camelMaybe when you use too many criteria at once you wind up with a camel when you were in fact trying to design a horse. I then had a brainwave and decided to push the rules of the competition right to the wire by planning to take leveraged trades after the market volatility that often occurs in the autumn had passed. I've chickened out of that one; if I'm getting it wrong time after time why gear up the losses?

It’s one thing accidentally dropping a tenner out of your pocket as you walk down the street, it’s entirely another matter to be taking them out of your pocket and throwing them in the gutter as you go.

So, 4.684% down after eight months; utter crap on the one hand, but not the end of the world on the other.

The vital thing when you’re looking to take money out of the markets is not to lose your stake (your capital). Ninety five thousand isn't quite the same as a hundred thousand but it’s OK, the bulk of the capital is still intact.

Going forward I'm re-launching my whole focus, turning my back on individual shares and their short term volatility and investing in funds only. I've held a small amount of money in funds from the start of the competition and on balance it’s worked out well. As of November 30th the monies invested in those funds was 2.4% up. 

I'll update you in quite a lot of detail on exactly how I plan to make this work next time I write. If that's not before Christmas, let me wish you a Very Happy Christmas and let’s hope we all make our millions very soon.

 

Yours, aye

 

Humbug

 

 

 

Fagin picks a pocket or two - he's up £30,933 and accepts Humbug's long term challenge

 

 

The ocean asks for nothing but those who stand by her shores gradually attune themselves to her rhythm - Charles Dickens

Once again I have become convinced that making money is not difficult in the market, as long as one is patient, and disciplined, and learns to accept the market conditions and work with what the market offers.

This month I’ve triggered in, wiggled out, triggered in wiggled out a number of times with PMO, HGM and KAZ.

A number of my shares have hit their all-time high or at least annual high. These include Legal and General (LGEN), gambling platform GVC and Advanced Medical Solutions (AMS).

I also got lucky with Ashmore (ASHM) and Anglo American mining (AAL) with sudden, and welcome gains.

The key aspect for me this last month has been careful trade management, trying to master my exits, sticking to my trade plans regardless of my thoughts and feelings.

Because of this careful trade management and keeping my discipline, I took a £700 profit in KAZ where last year I think I would’ve let it slip into a loss.The Great British Trade Off

I had my share of frustration too this month as I chose between tech stock IQE and oil stock PMO (I could only afford to trade one). I put my money into PMO at 65 and came out breakeven a day or so later and then of course watched IQE take off!

Following this I put my money back into PMO at 65 again, made a reasonable profit and exited at 67, only to watch it shoot off to 72, missing out on a further £2400 odd. As I write it looks like oil may give us more yet!

To help with trade management and performance analysis I cannot advocate the keeping of a detailed trade journal enough.

I spent a happy hour analysing my trade journal so far this year at month-end, and while I am happy with my results, and have a win rate of + 60%, I noticed, through caution, I have been under-trading! Also the bulk of my per-trade risk, on average has been between 1/2 and 1% of my account. I would not have noticed these things without having kept the data since April.

To this end I am doing deeper research to see if I can add (market permitting) two or three more trades per month. I will also increase my per-trade risk to between 1 1/2 and 2% of my current account.

I’m sure if I were investing like Humbug I would be fearful; overbought conditions, a big drop, a big drawdown or a crash - but as my pot is a trading pot it is supposed to be used for picking the market’s pocket and so this I will do!

Speaking of Humbug, I am very glad to see him back and well rested after sailing and without his account being too damaged!

I also accept his gauntlet of running this competition for another four years. I think his challenge may make me a rich man! :-)

My running total as of Friday, 3rd November is £130,933.01. I am 30% invested and looking to oil for further quick gains.

 

 

Yours Fagin

 

Down £1916 Humbug's back from sailing, but has his portfolio got any wind in it's sails?

The sailing was very good, thank you for asking. I didn't run aground, ram any other boats, or indeed hit anything else, which is always a result. I was taught my boat handling skills (such as they are) many years ago on the Thames in London by Bob Crouch a Queens Waterman (these are the boys who take the Queen on the river when she goes afloat) and whilst I'm never going to have a fraction of his skill I can usually get through a sailing holiday without falling in or frightening myself too much too often.

I like the peace and calm of a sailing boat and always come back from a holiday on mine in a better state than when I started. And as I found on my return this time that my portfolio hadn't totally collapsed, the entire experience was good from start to finish.The great British Trade Off

The question is, did I take an appallingly stupid risk in going away and forgetting the market for a couple of weeks? Nah I don't think so. Were I trading as Fagin is the answer would be yes, but I'm not, I'm investing and investing and trading are very different animals.

Similarities for sure, exactly as a domestic cat and a lion are both cats, but whilst you can usually stroke your neighbour’s cat and walk away with your fingers still attached to your hand, stroke a wild lion and you'll be lucky if your arm is still joined to your shoulder. 

It’s this fundamental difference between trading and investing that I'm coming to enjoy as an investor, the fact that I don't have to work half the night and then be at my screen before the markets open day after day as I used to when I was trading makes for a much easier life.

The down side is that after seven months of The Great British Trade Off I'm still struggling to turn a profit while Fagin is scampering off into the distance; he was 23% up last time I checked, meanwhile I'm 2% down.

 

While I was away I did a lot of thinking and these are my conclusions. 

 

  • Fagin's performance is superb, end of. However I'm not actually that unhappy with my own. Because I was becoming more and more concerned about the risks I was running as a trader I wanted to move to investing and view the couple of grand its cost me so far as part of my tuition fees.
  • With five months to go and Fagin so far ahead of me, clearly this current contest is no longer mine to win, it’s his to lose (and for what it’s worth I don't want this to happen, given that this is a real money competition rather than a fantasy one, the last thing in the world I want is for him to blow up his account and lose his money). So I'm becoming increasingly resigned to my fate.
  • Over time the market produces about a 10% total return including dividends re-invested. A good private investor with an edge should be able to beat this. The 'daddy' of all investors, Warren Buffett, has averaged 20% a year for years, as has the UK's first ISA millionaire John Lee: check him out here:

 

Lord Lee of Trafford, UK's first "ISA Millionaire" and author of "How to Make a Million - Slowly"

 

I don't know how volatile Warren Buffett's results are, but within the 20% than John Lee achieves on balance, there are wild variations.

In his excellent book 'How To Make A Million Slowly' he records gains of    44%   in one  year and     on the other hand loss's as high as -42% in another. I personally would happily settle for a lower rate of return than 20%, in exchange for less drawdown.

  • Investing and trading require different mindsets and it’s taken me a while to change from being a trader to being an investor. But I'm getting there and the more I do it, the more I like it.  

 

  • I mean what's not to like? Less work and shorter hours for a start and then do the sums, 10% growth a year with the current £20k ISA allowance invested each year will turn £100k into over £1.5 million in 20 years. At 15% the end result is over £3.5 million and at 20%  its  over £6.5 million.

Compound interest is something else, the old gag 'if you know what it is you’re probably getting it, if you don't your probably paying it' is so true.

As I've said before, I've now got what I think is a fairly well balanced and hedged portfolio, which because I'm increasingly using funds is spread far and wide across the globe. I'm due to receive £500 of dividends in the near future which won't cause me too much pain and apart from using some leverage if conditions are conducive and some fine tuning as I see fit there's little more for me to do between now and the contest's end on April the 5th 2018.

 

Finally for this month, I want to put on record that I'm happy to accept the results of this year’s competition win or lose and as I said I think I'm too far behind to now have any realistic chance of my winning; what will be will be.

However I think it would be good for the exercise to have another contest every year for the next five years not setting the clock back to £100k each year but running it on cumulatively. In other words Fagin starts next year with whatever he finishes this year with, as do I.

I'm putting this idea up not because I want to keep going until I win and then stop, but because the more I think about making money in the markets, the more I realise that it’s all about long term compounding and for this exercise 'to see if investing is more profitable than trading' I think we need to give it longer than one year.

 

 

 

 

 

 

 

Fagin is up £22,211 in just six months and has some fond advice for his friend

 

The plain rule is to do nothing in the dark, to be a party to nothing underhanded or mysterious, and never to put his foot where he cannot see the ground’ - Charles Dickens

 

There are so many reasons why I prefer to short term swing trade (instant gratification for one!) but two key political reasons for me at the moment are Brexit and North Korea

Who knows what the implications will be for the UK with Brexit soft or hard; I mainly trade the UK market (sometimes I trade TNA a 3 x leveraged US ETF of the Russell Index) and I am loathe to take my eye off any purchased UK share for very long at the mo. 

Hence I have found my solace in the short term market and this with the added boost from trading faster moving commodity stocks as I have said. 

It may be that I miss out on the huge gains possible from long term shareholding.....

To quote Warren Buffet's partner Charlie Munger

'you can argue that if you're not willing to react with equanimity to a market price decline of 50% two or three times a century you're not fit to be a common shareholder, and you deserve the mediocre result you're going to get...'.

Besides, to my mind the US and uk-union-jack-flag-waving-animated-gif-9N Korea are both mad enough to push the big red button and in the ultimate worst-case scenario as Fagin’s gang and I live in London, I can look forward to the great stock market in the sky and holding my longs for all eternity. As my friend would say ‘There are no pockets in a shroud!’

The thing is, I don't think Humbug has the stomach for those kind of drawdowns either and as I love him, I told him so.  I hate to see him lose money - he is one of the wisest, kindest and most generous men I know! 

While his strategy is certainly not as flawed as Lil Kim's and Trump's, I think Humbug could be putting his head in the sand here and I am worried for him; here's what I have observed....

 

Humbug's Possibly Flawed Strategy: 

 

  • He set up a longer term investment portfolio (not necessarily an inherent problem) 
  • I may be wrong but it looks like he's treating it like a short term proposition; selling positions       early (You need a stomach for the drawdown if you trade for the longer term as discussed)
  • He's taken a volatile leveraged gold position (a reasonable potential fix if you keep a hawk-         like eye on things)
  • He's now gone on holiday for two weeks and won't look at the market (where is the trade          management?!)

 

I too have a gold position in HGM (Highland Gold) but I have to watch it carefully as it can move 5% in either direction in a day or two! If I am away from the markets with no internet I believe it’s prudent to go flat. 

Anyway, I hope I am not gloating just because I am winning and I hope he has set hard stops!

I wish Humbug all luck and he has time yet to win the competition - however for me; rules is rules. I am nervous for him and wish he'd asked me to look after things while he's away! :-) 

I took a position in ASHM (Ashmore Group) this morn at 340p, initial target 360p, and I still hold HGM, KAZ, AMS, LGEN, HLMA and GVC. I cashed out of PMO and I have given back last two days with KAZ.

I am around 70% invested and I'm up £122,211.65, a 22% gain before costs thus far.

 

Yours Fagin 

 

 

He's £2380 down but remains confident; when the going gets tough, the tough, er - go sailing?

September has been an absolutely crap month for me. At the beginning of the month I would have actually broken up from the summer's losses into  a profit of a thousand pounds had the price of Indivior PLC (INDV) not collapsed on me, after a warning of litigation troubles in the US and that was only the start of my woes.

At the low point I was £4k down, but then guess what. The sun came out.

For sure I'm still stuck in the stuff and way behind Fagin at the halfway point of The Great British Trade Off , but I've pulled back almost £2k in the last ten days and I'm very hopeful that the good times are about to roll.; there's a great song from the late sixties by the Love Affair called Bringing on Back the Good Times, its on YouTube - here's a a trip down memory lane:

 

 

 

........if I win this competition I may well have it as my theme tune.

If I win this competition and yeah, that is going to be no easy trick, no matter how well my little mini hedge fund does over the winter. Because Fagin is trading right at the top of his game. 20% up in six months is a blinding performance. WELL DONE HIM.

Trading and investing is very much a confidence thing and confidence is  fragile.

Mine got a kick in the mouth last week (even as the portfolio was recovering). I took my great little car to the BMW garage for its annual service, booked it in and talked in detail with them about what needed doing and left it there. Rang up the following day to see when I could collect it and guess what, they'd forgotten me. 

As I said at the time, 'for crying out loud guys how many tortoise's do you know who drive a Beemer, write for diyinvestor.net and are a dead ringer for Bill Nighy?' 'How could you forget me?' DUH.

To be serious, whilst that's a true story and the garage did forget me, my confidence is just fine. But when you've had a month like I've just had, you do need to have your head in the right place otherwise it all gets on top of you.

I wrote a few weeks ago about my intention to leverage up the total value of the £100k portfolio that is the basis of the competition, by using either CFDs or the Spreads.

To date the only leveraged trade I've taken was a £13k position on Spot Gold via a CFD (which is a couple of hundred down as I write, but still well within limits) but I'm planning to take more towards the end of October when the market should have settled down. (September and October are often volatile, difficult months).

Margin trades have the potential to generate monster returns on the capital invested, but should come not just with a health warning, but a warning of INSTANT DEATH if they go badly wrong. And trust me they can go badly wrong.

So I've been wondering how to hedge them into the overall risk profile with all the other stuff I'm holding and  was  very interested to see this was a topic covered by a guy called the Wheelie Dealer, who does just that with his own portfolio.

If you're interested in this idea and how to crank up portfolio returns, his website is well worth a look, www.wheeliedealer.weebly.com He was also interviewed here on DIY recently - take a look at Q&A in conversation and follow the links, its good stuff, he knows what he's doing.

I'm off sailing for a couple of weeks and have decided to not even look at my portfolio whilst I'm away, am I being sensible in giving myself a complete break, or taking a stupid risk.............................as always, I'll find out soon enough won't I.

 

 

 

 

 

Fagin's got the Midas touch - he's £19,784 up at the half way point!

'A man can well afford to be as bold as brass, my good fellow, when he gets gold in exchange!' ~ Charles Dickens

 

Once again this month commodities have been very good to me!  

I was in the right place at the right time to take advantage of the pullbacks in gold and copper this last couple weeks and to also to take advantage of the rally in oil. 

I am long Highland Gold (HGM) and KAZ Minerals again and I have now taken a position in Premier Oil (PMO) also.

I'm finding that Brexit worry has had me reticent to trade many UK stocks.

The UK market has diverted from its usual course of following the DOW and I have been finding solace in the price action of these three commodities above. I like how fast they move too. the great british trade off

When I hear Humbug saying he's taken a large leveraged position in gold to catch up in the competition, while I am all for it, it does sound rather more like something I would do.

Perhaps he will have to turn to my pickpocketing ways to be able to make his mini hedge fund work! 

As I say, I am fully in support. I want to win the competition but I still want Humbug to make money! 

My running total at the halfway point (Sept 30th) since kickoff on April 1 is now nearing plus twenty percent at £119,784.

Last week was particularly good to me. I am 75% invested. 

I did not trade as much as I expected in September and I lost money in the promising firm Sirius Minerals (SXX) and gave back with Legal and General (LGEN) and Advanced Medical Solutions (AMS) holding on too long. I do hope there will be plenty of opportunity in the second half of the game!

 

Fagin

 

BAH! Humbug is down £3713 and turns to the 'crack cocaine' of trading - has he lost his conkers?

Running total -£3713.16.

Even I am beginning to struggle to put a good spin on my results in the Great British Trade Off, as Fagin and I come up on the half way point.

But here goes. The market (both the FTSE 100 and the FTSE All Share Index) are both just about where they were at the beginning of April. Sure I'm 3.7% down, but I've got in and out costs that the market doesn't. So I'm not too far out of line, however I'm aiming to beat the market convincingly not dribble my money away in easy stages, so I can't pretend I'm happy with my performance to date. crazy2However September into early October is frequently a poor time for investments already held, but also often a good time to buy, so I'm not ready to throw in the towel just yet.................................................as I look for a much stronger second half to the contest using leverage to give me an edge.

To that end I took my first leveraged trade of the contest today, a long (betting the price will go up) Spot Gold Trade. 10 mini contracts at 1296.69, so a £13k position for an opening margin of £94. This is the 'crack cocaine' of trading when you can swing a £13k position by putting less than a £100 down. These trades are not for widows and orphans and I'm very aware of the risk I'm running, but whether I make or lose on it, without wanting to sound like a cocky twat I'm totally relaxed about it and believe I have the risk under control.

We shall find out shall we not.

Ouch: Humbug loses £1508 in a day, but somehow remains upbeat

 

Trust me, being only four hundred and fifty odd quid down after the bloody day I've had is a monster good result and without blowing my own bugle too loud shows the wisdom of having a well balanced and diversified portfolio when you’re investing rather than trading.

Today started really badly, just after 7am the regulatory news feed (RNS) began pinging things into my phone. Most were the usual market clap-trap, but one had my full attention.

Indivior (INDV) is a large speciality pharmaceutical company that looked to be riding high with good momentum and as a result of Bearishthat I'd recently doubled my holding to £4k.  To my horror it was advising the market that (whilst it planned to appeal the judgement) it nevertheless had lost an important legal case in the US over the protection of some of its intellectual property rights.

The bottom line in this game is that these things happen and there's only one way to deal with them that's calmly, rationally and quickly. Everyone has their own way of handling these situations, some people double down and buy more, some sit it out hoping for at least a partial recovery in the price, some go into a huddle and start to weep, Fagin and I sell as fast as we can and after we've finished swearing and throwing the furniture around get happy and move on. 

As I feared it would, the price fell off a cliff in the pre-market auction and when it eventually staggered onto the big board it was 35% (ish) down. It was difficult to get a trade on and as a result it took me till about twenty past eight to get out at 253.4p for a loss of £1508. It was a while before I got happy, but I now am and I've moved on.

In spite of what was a big catastrophe today, it 'only' cost me 1.5% of the portfolio and as I said in my last update a fair number of my holdings are now coming good.

My star position is McColls Retail (MCLS) up 48% and the one to watch is the brilliantly named Inspired Energy (INSE) I bought in yesterday on obvious momentum and its up 13% in a day. On the subject of brilliant names, I've also taken a shine to Wizz Air Holdings (WIZZ) not least because it now shows me a profit of 16%.

 

 

 

Fagin: up £13,175 and looking to put Humbug away

“I have been bent and broken, but - I hope - into a better shape.” Charles Dickens, Great Expectations

 

August is traditionally, supposedly, a quiet month.  Traders and investors are away, less liquidity in the markets etc... this year however we have KAZ (Kaz Minerals) the gift that keeps on giving. Another 15% in the last week - I am up another £4K on paper.

It's important not to be smug. Each day I must patiently go to the market with my metaphoric 'bowl' and ask the market to fill it. Often the market fills my bowl and then sometimes it takes everything bowl and all! However at this stage in the competition, my only losses stem from me breaking my rules, with the 1st quarter successfully ahead, I can see no reason to let up now.

If I trade my system (false breakdown short term swing trading), keep my discipline and manage my mind, if the triggers keep firing and I don't get greedy, I can see no reason why these results should not continue for the next quarter and indeed to the end of the tax year. Fagin

I can see some sense in Humbug's idea of using leverage and compounding but I think his strategy is better as a multi-year plan where is mine is obviously designed for the quicker buck.

I am Conor McGregor to Humbug's Floyd Mayweather, except in this scrap I intend to maul Humbug in the second round!

Pot total is now running at £113,175. I am around 50% invested and long KAZ, LGEN, HLMA, AMS and back in gambling platform GVC. I missed out on 6% not getting back into HGM (Highland Gold) through dithering!

Looking forward to the next quarter's cut and thrust of short-term swing trading; the only change to my current strategy of trading pullbacks in an uptrend is:

  1. a) spend a bit more time doing my research homework and
  2. b) not to dither!

 

Yours, Fagin

Humbug's aiming to use leverage to close the gap, but with one eye on a potential downturn

Rome wasn't built in a day apparently and you also can't build a balanced risk-averse investment portfolio that embraces value, quality and likely momentum in a day either.

It’s taken me about four months to get most of my 'building blocks' in place, so to use a phrase it was dot on the cards that Fagin would race ahead of me in the early stages of The Great British Trade Off and he's done just that.

I'm investing whereas he's trading and in the last couple of months he's really been banging in the short term results and is currently some £11k ahead of me, trading brilliantly and proving a formidable opponent. However far from being despondent I'm quietly optimistic for many reasons and hope the tortoise will have overtaken the hare by April 2018 when the competition ends.

Whilst my portfolio itself is £2k down as I write, it’s taken both time and cost money to weed out the inevitable mistakes and sell off the under performing shares and to begin to double up on the outperforming ones, such as Games Workshop (GAW) and McColl's Retail (MCLS) - both are up over 25% since I bought in and I hope that they and others like them with powerful momentum will power me to victory.

I believe that I've now got my money riding on companies that are likely to significantly outperform the overall market in the medium term and further, after my latest 'weeding out session' I'm now only 75% invested and am planning to use that £25k balance to fund margin trades to leverage my winning positions further still.tortoise

I say 'significantly outperform the overall market....', as an investor I'm tied to the overall performance of the market more than a trader  and the danger I face is that there may be a significant correction in the next few months and along with everything else my selection of shares will fall sharply. So even if they do outperform they will still lose.

I'm well aware of the risks I run having a long only portfolio and using leverage as well, so I'll make sure I've always got enough spare capital to get a protective index short on if I need to. Other than that as I don't want to be jumping in and out of the market all the time there is little more I can do.

So by using Contracts For Difference (CFD's) and also Spread Betting I intend to effectively double the £100k capital that Fagin and I agreed we would each use for The Great British Trade Off; the plan being to double, treble and possibly quadruple my winning positions.

It’s a big if, but 'IF' I get it right and the market is kind to me the huge leverage will transform my results*

The idea is classic Jessie Livermore - cut the losses quickly but run the profits really really hard.

 

(* if my auntie had wheels she’d be a bus......Ed)

‘So now, as an infallible way of making little ease great ease, I began to contract a quantity of debt.’ Charles Dickens

I was very interested to read about Humbug's plans to use leverage to try and win the Great British Trade Off! An interesting idea and not outside the rules - that's one of the things I like about him, his thinking is often quite lateral and quite ruthless. When a man is down a man's got a do what a man's got to do....LOL. 

I was a bit more perturbed about a plan he mentioned this week to feed me laxatives. I am travelling abroad with the whole of Fagin's gang, the last thing I need now is a dodgy tum. 

To be honest I think Humbug should focus more on the three M's:  Mind, Money and Method rather than his three L's: Leverage Laxative and Losing.....

Let's address the issue here of my risk. Fagin 3

Humbug seems to think I simply put on a £30-40k trade and then risk the whole 30-40 grand. However I'm using a probability based system and my entries are very carefully chosen and my stops are very tight, as tight as the market will reasonably allow me without me being stopped out for nothing again and again. 

Risking 0.5 to 1% of my account, my trade size is then dictated by the position of the stop. This tells me how many shares I can buy. As my stops are as tight as they can reasonably be and my entry is so specific I can usually position size well while still keeping the risk to 0.5 to 1% of the account. 

This is the quote (below) that opened my eyes to the possibility of the entry and stop used in this trading method - 

'For the trend to continue the -1 ATR must hold. That's why I prefer trading at the -1 ATR, where the danger is the greatest but the risk is the least which allows me to position size the heaviest. So when the trade works out I make the most money. It allows me to play the game for the cheapest ticket I can get!' 

Humbug has a point when he says that a share may simply tank overnight or halfway through the day as indeed PFC (Petrofac Chemicals) did earlier this summer. However over a block of 30 trades my winners will outnumber my losses and be larger in size. 

I tested this method over and over in a demo account. Over a block of 30 trades even with more than one loser per block at 10 times my risk I still came out on top. 

Normally I would also limit my trade size to a maximum of 30% of my account on any one trade, however I have stretched this to 50% on any one trade for the purpose of winning this competition faster. 

Dr Alex Elder said this week that he runs his portfolio like a hedge fund so I do hope that Humbug will make a good comeback, he's certainly in good company. Me, I am happy just to pick a pocket or two! 

I don't watch the money if I can help it, I try to focus on the trading itself, so I was disappointed to see while completing my trade journal this weekend, that I had given back a few thousand on Thursday and Friday which was more than I first thought. 

I was late getting out after thinking seriously about going flat on both Wed and Thurs. It just goes to show how closely you have to pay attention....... Dr Alex Elder also told me the old trading maxim: 'get out quickly or not at all'. 

Still after the mistakes, costs and stamp duty, the shorter term competition trading account in the Great British Trade Off now stands at £109,342.11, 9%+ since April. 

 

Yours Fagin

 

Running total -£699.24; Humbug's well behind and he's starting to wonder if greed might be good.

Not a huge amount of exciting stuff to report since I last updated three weeks ago. On the one hand investing is less stimulating than trading, on the other hand (so to speak) you tend to bite your nails less and sleep better. For sure I don't get the huge uplift Fagin gets when he picks a winner, because I've got a lot less skin in each position. Three weeks ago I doubled the size of the portfolio, spending £40k by buying £2k positions in twenty different shares. Two of them, Games Workshop (GAW) and McColl's Retail Group (MCLS) are already each up 25% after costs, which in three weeks is a brilliant performance, but between them my gain is only £1k.

Had Fagin taken those trades, instead of betting £4k he might well have bet his entire £100k and had he done so he'd be sitting on a £25k profit against my £1k, however the risks I'm currently running and those he might have are at totally different ends of the spectrum, but I am beginning to wonder if I need to be a little bolder.

Currently I'm 86% invested and plan to add more positions and be at least a 100% invested, certainly by the half way point in the Great British Trade Off at the beginning of October. Given that my early performance was always likely to lag Fagin's because It didn't make sense committing all my funds to the market on day one, I'm mulling over the idea of using some leverage to help make up for lost time. 

If I use my remaining £14k as gordon gekkodeposit either for contracts for CFD's (contracts for difference) or to simply spread bet, I would at a stroke double the size of the line I'm swinging. There's nothing in the rules that says 'I can't do this', but is it a bit sharp? And if it is do I care?

Just think, if Gordon Gekko was in my position, well behind in the Great British Trade Off with time beginning to run out......................................what would he do? 

 

'Mind, Money Management and Method' Fagin's in the zone as the titans of the Great British Trade off clash - over a sea-bass!

A day wasted on others is not wasted on one's self.' Charles Dickens

 

Hello my dears, 

After a wonderful sea-bass dinner, cooked by my lovely fiancé Charlie and enjoyed with her and with my good friend Humbug and with my psychology now back to normal - I'm feeling much more comfortable trading. 

It's been business as usual these last three weeks and I've managed to make another £4000 paper gain since I last wrote. These gains largely made through jumping back into the high flying KAZ - Kaz Minerals (a copper play) and a 6% gain in gold miner Highland Gold (HGM.L). I know my psychology is back to normal as I also took a £600 loss in BAB (Babcock) and pulled the trigger on a trade in the international distributor Bunzl (BNZL) without a quibble. I am currently 95% invested and haven't been able to afford to take the triggers on offer since Thursday. cat cigar

When I do sell. The next task will be to practise the same trade 10 times in a row without bucking the system. This is for my discipline and for my consistent profits. Mind, Money Management and Method (in that order) then practise, practise, practice. Technical trading should be boring. 

Humbug was on very good form when he came over - in addition to discussing our in-depth trading set-ups, Brexit theories and offspring shenanigans till late in the night, he also fixed my car into the bargain and bought another generous crate of sweets for Fagin's gang! He will need to profit from the market as I am sure my children eat all his confectionary gains! 

Once again I could not and still don't really understand his reasons for switching trading tack in the Great British Trade Off! 

This week has pretty much proven to me that active short term swing trading can outperform semi active private investing.....

Currently holding GVC, LGEN, KAZ, BNZL, HGM, HLMA and AMS (Advanced Medical Solutions), 95% invested.  Managing the trades I have with trailing stops. 

 

All the Best,

 

Fagin 

 

Buy, buy, buy - but let's hope its not bye bye: Humbug goes on a shopping spree

On Monday I was 46% invested when I wrote 'Whilst not taking stupid risks is vital as this is a real money contest and trust me I really, really, really don't want to lose my money, but I'm not going to win by being too cautious and staying in cash too long'. Well here we are on Friday and the portfolio has grown dramatically, I'm now 86% invested.

Was it a bold stroke of genius or the deranged lunacy of a bleeding idiot? Hum, who knows, but we'll find out in April won't we? 

What I decided to do was buy all the shares on my watch list in one go taking advantage of last Tuesday's early price weakness, rather than feeding into them one or two at a time over the summer. From an investment point of view you can make a case either way, drip feeding tends to average out market fluctuations so is perhaps lower risk, on the other hand if you've picked the right shares anyway, the sooner you get exposure to their potential upside the better. gordon gekko

History is no guide to the future, but it’s your starter for ten. It tells us that the overall market has delivered on average about a 10% return a year for the past hundred years with the dividends re-invested, now I'm not invested in the overall market, out of some seven thousand shares I'm in a well diversified basket of 35 that score very highly on the quality, value and momentum metrics and hopefully have been bought at a sensible time and price. So the questions are, given that this bull market is very old, has it got the legs to run strongly to next April? If so will my shares do better than the market because they're better than the average?  Two big imponderables and frankly I've no idea, however clearly it’s there to play for.

This week I bought into Bloomsbury Publishing (BMY) Centamin (CEY) Finsbury Foods (FIF) Games Workshop (GAW) GlaxoSmithKline (GSK) Harvey Nash (HVN) LSL Property Services (LSL) McBride (MCB) McColl's  Retail (MCLS) Miton (MGR) Morses Club (MCL) Persimmon (PSN) International Consolodated Airlines (AIG) UDG Healthcare (UDG) Vitec (VTC) and the brilliantly named Wizz Air (WIZZ).

The first three months of the Great British Trade Off haven't been either good or easy for me; I'm hoping the remaining nine will be a great deal better. Without wanting to be cocky, I think I've laid down some good foundations, so I'm looking forward to the rest of the competition with quiet confidence. I re-balanced after the first three months; the plan going forward is to do so again at the beginning of October and again in January - unless something goes tits up in the meantime that is.

Humbug's - £1702.20, and almost £6,000 behind Fagin; but he'd taken his pain, and he's staying cool

 

As you can see I've had a bad couple of weeks, my losses have been steadily mounting; in any given time frame a share will go up, down or sideways.

When doing what Fagin and I do its very important not to fall in love with our investments, we take a view on the likely future movement, if we're right we profit.......................................if we're wrong we have to sell, take the loss and move on.

In The Great British Trade Off my time line for holding something is longer than his so I'm willing to bleed for a bit longer, but even so if it ain't working, its goodbye.

I'm investing in a formulaic way, working to a tight set of rules:

Rule 1 is obey the rules, so last Monday I sold Character Group (CCT) Domino's Pizza (DOM) Greencore Group (GNC) NUMIS Corporation (NUM)  Old Mutual (OML) Prudential (PRU) Renew Holdings (RNWH) Sage Group (SGE)  Shaftesbury (SHB)  and WPP Group (WPP) for a loss including costs of -£791.90.

It’s never a barrel of laughs turning a 'paper' loss into an actual one but it was the right thing to do on many levels not least because eight out of the ten continued to fall after I'd ‘left the building'.

I replaced them with AG Barr (BAG) Computacentre (CCC) IG Design Group (IGR) 3I Group (III) Kingfisher (KGF) Morgan Sindall (MGNS) Moss Bros (MOSB) Oxford Metrics (OMG) and Synthomer (SYNT).

I'm now holding twenty good quality pushmepullyou2shares that are well diversified across the market by industry group, sector, size and likely risk. I'm also holding nine funds with a wide spread of investments across the world. 

So, although I'm still only 46% invested, I've now built the foundations of a proper little fund, but what I have to do in the coming weeks is not going to be easy. On the one hand I have to maintain the funds balance and diversification, but on the other I have to become fully invested.

Whilst not taking stupid risks is vital as this is a real money contest and, trust me, I really, really, really don't want to lose my money, but I'm not going to win by being too cautious and staying too long in cash.

Last Wednesday I went up to see Fagin and his gang and was very impressed with his mental attitude.

Trading this market is no easy trick and his head is in exactly the right place. We both have to remain 'cool as a mountain stream' no matter how difficult it gets.

Since April, the short term signals he trades are working better than my longer term ones, he's currently six thousand pounds or so ahead of me, but my head is also in the right place and with nine months to go it’s all there to play for.

 

 

'You see us here, quiet in our own home; our anxieties set at rest, our home restored to us; and knowing that, dear Trotwood, you know all.' Charles Dickens

Hello my Dears, 

Apologies I have not posted for a couple of weeks. When I am in a drawdown I like to focus on my trading. 

In the end I got a little bit of luck with PFC - I hadn't realised that during the period I held it they also paid me a reasonable dividend!

I must say, I really struggled psychologically to get back on track. 

Even though I managed to get out of PFC quickly and it didn't cause me as much damage as it could've done, it did leave me for quite a few days with an acute awkwardness in not wanting to pull the trigger.

I had to take a few days out just being flat to allow me to accept the loss and let go of my ego and emotion. 

It really struck me just how much of this trading game is psychological and I'm really glad to be trading a system - otherwise I might not trust myself to take a trade at all.  I find I am likely to either be overly cautious in pulling the trigger as I said or just as likely to jump on some momentum in the hope that I am going to grab the quick money back. 

Now I am in a calm state of mind it is clear to me once again; I just need to take out the emotion, follow my system, be a little more cautious than usual as the market is so overbought and trade what I see. 

The dividend added to my winning trades in Legal and General Group (LGEN), Petra Diamonds (PDL), GVC Holdings (GVC), DS Smith (SMDS) and Ashstead Group (AHT)was offset by losses in Evraz (EVR),  Fenner (FENR), Highland Gold Mining (HGM) and Bodycote (BOY) and meant that eventually I squeaked back into the black. 

I'm still holding GVC although it has pulled back a bit from £8.20 to £7.50 I am still in the money. I also re-entered LGEN.

Then I got lucky!  I entered KAZ on the 22nd June at 478 with a £48,000 trade (£500 risk). 8 days later the share is now at 539 - see below. 

Humbug is not going to like it (I’ll get sours rather than cola bottles now) but I never understood why he suddenly changed his game. He now has some catching up to do! :-)

After 3 months the trading portfolio is finally off the ground in what I have found to be very tricky trading conditions – the trading portfolio now stands at £104,267.21 through short term long trading alone.

 

Something to build on now at least. 

 

Yours Fagin, 

 

Click to enlarge

 

KAZ Progress

 

Running total -£1083.62. Fearing his portfolio is ebbing away Humbug is determined to get his mojo back........yeah baby!

You know what?.........................................I'm doing this all wrong, if I want to win the Great British Trade Off I've got to change direction and start to make MONSTER MONEY rather than let the portfolio drift slowly downwards, all that's going to do is get me second place, and second is nowhere is it? Particularly when there's only two of us in the competition, Fagin and me.

I know I wrote recently about not austin powersdoing stuff for the sake of it and being more concerned about losing money than making it and I strongly believe both are a sensible thing to bear in mind when running an investment portfolio. So I'm not about to become a wild reckless gambler buying and selling for the sake of it,  but clearly I have to cull things that aren't working more quickly than I have been and to re-invest those monies in something that is more likely to do well, otherwise I'm going to die from a thousand tiny cuts.

I've not suffered any profits warnings, nothing has come off a cliff and nothing is causing me sleepless nights, but ten of my shareholdings have clearly lost their mojo in the short term and are either going slowly down at worst or have stalled at best, so they need to go.

The overall concept I'm working with hasn't changed, I'm looking to buy shares that are demonstrating upward momentum and hold until they cease to demonstrate it, this however is easier to say than actually do as nothing moves in a straight line and knowing when to sell is in many ways more challenging than knowing when to buy.

I'm enjoying this competition hugely, not least because it’s forcing me to constantly reappraise everything I do and think. Mind you I may not enjoy the losses when I sell DOM, SGE, GNC, CCT, NUM, OML, PRU, RNWH, WPP and SHB tomorrow morning. I'm going to work late tonight doing lots of due diligence to see where (if anywhere) to redeploy the monies from the sales, next week promises to be busy...................................I'll keep you posted.

 

Running total -£408.88 Humbug’s been sailing and decides to dip his toe in the water.

I've just come back from another week of sailing, reading and thinking hard. Currently my boat is up in Norfolk, now I don't know how well you know that part of the world, but at this stage of the summer even though there are tourists there, it’s still possible to totally escape into a calm little tranquil world of your own........................................which is brilliant for plotting, planning and of course thinking.

One of the books I took to the boat was 'How to Make a Million Slowly' by John Lee, this is the guy who is believed to be the first person to make a million pounds in an ISA, a feat he achieved back in 2003.

It’s always said that the first million is the hard one, since 2003, John (who I've never met but would like to) has continued to do brilliantly and he's now reportedly close to being the first person to make five million pounds in an ISA. That really is a clever trick, I'm in awe.

His book is very simple and quite short and like most people who excel at something, he makes making a fortune sound so easy and of course it’s anything but, however that doesn't invalidate what he says.

One of the key things I brought away from his thinking is that value will usually come out in the end; basically if it’s a trading company, you want to find a quality one with good fundamentals that isn't trading on a high multiple of its earnings and if it’s a property or investment company, again choose a quality one, but where the current share price is at a decent discount to the tangible net assets.  In both cases the investor isn't looking for something just because it’s bombed out and dirt cheap but something that's well worth owning which happens to be cheap at that time. A world of difference.tortoise

This idea sits well with what Fagin and I have developed, where we're looking to buy into something that is showing momentum but is below a moving average that in a sense shows where the current consensus of short term fair value lies. 

As I've been saying for a few weeks now, I'm very wary of a market that's within spitting distance of its all time high at a time when everywhere you look in the country it’s either already gone wrong or looks like it’s about to. I wasn't planning to take any new positions this week because of all these factors, but changed my mind after taking John Lee's wisdom about value on board.

I've opened two new positions, one is a property asset play the other a geared angle on the price of spot gold.

The property purchase was Daejan Holdings Ltd (DJAN) they are probably the largest residential landlords in London as well as having exposure to both UK and US commercial property.

The company is effectively 80% owned and controlled by the Freshwater family and is an old fashioned 'family' firm with all the good and bad that that entails. I really like this kind of deal where a huge part of the family wealth is in the firm and as a result you just know that the directors aren't going to do something stupid and chuck it all away on an ego trip.

The principle drawback is that there's a very thin market for the shares with little liquidity, so prices can take a run on very little buying., indeed I got slightly caught out by this when I bought in at 6691p., the price has since eased back. However the underlying value is brilliant, the tangible net asset value per share is 27% above the cash price and provides a huge margin of safety for investors. I'll drop 73p on the ground and bend down and pick up a pound any day all day long, good game.

The gold situation is Highland Gold Mining (HGM) which looks good value right now; as a side issue Fagin has made a lot of money on this one in the last couple of years, with a bit of luck it'll now be my turn.

Both Spot Gold and HGM have pivoted round making the buying signal we look for and they both tend to move in the same direction at the same time with HGM being a geared play on the underlying. With all the political and economic problems we face there is a good case to be made for holding Gold and whilst there are obvious dangers to buying a mining company that digs gold out of the ground in Russia, my take is that the rewards outweigh the risks. It’s the old gag you've got to risk it for the biscuit, albeit I haven't risked too much, two thousand pounds worth at 146p.

Looking back, if I'd bought in three years ago at 70p I'd have doubled my money and banked 19.4p in dividends along the way. Will the next three years be as good? Who knows, but the current dividend is 7% so there's the starter for 10 with no conferring. 

  

Lord Lee of Trafford, UK's first "ISA Millionaire" and author of "How to Make a Million - Slowly"

 

'What a total bloody mess.......' Humbug's + £60.81, but he's not happy!

What a total bloody mess, I don't mean my portfolio (although clearly that could be better) – no, what I mean is the entire state of the country, everywhere you look it’s a shambles.

It's frightening how fast things unravel is it not? In the space of six weeks we've gone from 'strong and stable' to unstable and frankly chaotic and very dangerous.

I've been away for a week sailing and in the tranquillity of Norfolk have been thinking long and hard about my investments and working out what the dangers and the opportunities are for me at this time. To my mind the current situation nationally now has much in common with 1974 and anyone trying to run a business or trying to invest then still breaks out in a cold sweat thinking about it.

Currently it's very clear, almost ten years after 'the big bust', that many sections of society and the economy are still fragile to the point of being almost broken and that the austerity, near zero base rates and QE (basically printing money but 'giving' it to the markets), imposing a tight pay cap on the public sector, restraining benefits and also cutting the public sector services back to the bone simply haven't worked.

tortoiseAll these actions have done is to kick the can down the road from 2007/8 to now, inflating asset prices to stupidly high levels, helping the super rich get even richer, and squeezing the middle beyond belief.

If you add into the mix terrorism, the uncertainty over Brexit, rapidly rising inflation, a Prime Minister who is suddenly a broken political force attempting to lead a minority government that clearly doesn't know what to do next and a hard left that three months ago were only battling to take over the Labour party, but having largely succeeded, are now lining up to take over the country, you are well on the way to generating the perfect storm.

There is huge anger and a great divide over much of the population, this has perhaps always been the case, but back in the day it was more clearly defined.

Then it was north v south, working class v the elite and left v right, now there are dozens of 'angry' strands. To add to those three there's now  young v old, educated v uneducated, people who work v people who don't, rich v super rich, poor v middle class, town v countryside  the list just goes on and on and if you think for a moment or two you'll find ten more examples.

From somewhere we need someone of charisma and talent to get a grip and sort things out, a Bevan, a Churchill, a Thatcher and dare I say it, a Blair.

The problem is that to my eyes none of the present senior politicians is capable of doing this and even if they were they don't have a mandate to take the radical action needed. Clearly the risk is to the downside and that we may well descend into financial and social chaos in the next few years.

I'm sure that you just like me have strong views on what should now be done, I won't bore you with my thoughts.........................................but clearly a new approach is needed, as a country we need to start thinking outside the box or things will get out of control.

Which brings me neatly back to 1974 and the chaos that ensued then. So what does a private investor like me do right now? The answer, nothing.

Although I'm two months into The Great British Trade Off with Fagin, right now I'm more concerned about losing my money than making monster profits.

What I'm trying to do is construct a portfolio that is reasonably defensive to ride the down turn that I'm certain is coming but still one that has the potential to take advantage of any up swings. I'm only 36%  invested and am holding £64k in cash as I want plenty of headroom to buy when there is obvious value to be had. I did nothing last week and have no plans to either buy or sell anything this coming week either.

 

Masterly Inactivity, I'm watching and waiting.

Humbug's sitting on his hands ahead of the election: Running total + £236.83.

The grand plan going forward is a week of don't just do something.......................................stand there. Six days before an election that a few weeks ago looked like a Conservative landslide but now no longer does isn't the time to be opening new positions me thinks.

Markets are once again looking very toppy to me, this also adds to my mood of caution. However never forget, doing nothing is every bit as much a position as buying or selling.tortoise

Looking back over last week, my limit buying order for Communisis  PLC (CMS) went through last Monday at 49.75p and currently shows me a profit of £28 after costs, sadly my order for Safestyle UK Ltd (SFE) didn't, although looking at a chart makes me wonder why. When I get time I'll analyse all the weeks buying trades to see if it should have done.

Our system picked up the pivot points for both of them perfectly, good stuff.

Fagin looks to trade his way back into contention

So my dears it seems I was lucky to get out of PFC when I did! I read in Investors Chronicle today that it has now fallen 36%! 

Over the last few days I took profits on half of my position in GVC at 820 using the wise key word of Dr Alex Elder - enough! 

As well out of KAZ on the 16th and PDL on the 23rd, over the last week or so got into LGEN (246) AHT at 1566 and also SDMS at 424 and I got out of half of each position in these last two Today (Thurs) at 440 and 1600.

I am being very disciplined and keeping a close eye on the price action of each share. I am only down £250 now and I do hope to be back in the black by today (Fri). UK futures are positive as I write. hare

It's very important not to 'revenge trade' though so I won't really look at the money. I will only look at the quality of my trade. 

'Vengeance and retribution require a long time; it is the rule.' Charles Dickens 

I had a great meeting with Humbug last week who came over for markets and dinner. He arrived clutching armfuls of sweets for my gang and a delicious pudding, fruit and fizzy cola bottles for my fiancé and I. 

I tried to get a further understanding into his mini hedge fund thinking and while I can see how his plan will work well in an uptrend, I still don't see how he's going to manage the larger drawdowns. 

I must say a competition between investing and trading is fascinating and I look forward to seeing Humbug's next post! 

 

29th May - Less is Moore: Don't just do something, stand there - Humbug + £41.38

I was sad to see that Roger Moore (aka Mr Bond) died this week. There's a great quote from his second wife Dorothy Squires from long ago, 'of course he can't act for toffee, but doesn't he look gorgeous just standing there'. Don't just do something, stand there is also sometimes exactly the right thing to do when trading and investing. Of course the hard part is knowing when to do it.

In my new role as chief investment officer of my little mini 'investment/hedge fund' I aim to only change the portfolio once a week if at all as I'm trading the weekly signals from our system. At the end of last week my view was that there was nothing for me to either buy or sell, so that's what I did...................................nothing.

It worked well, last Friday the 19th I was -£439, this Friday I'm +£41 an improvement on the week of £480.

Going forward into this week I'm not looking to sell anything, indeed much of the portfolio has decent upward momentum, my star performer being Staffline Recruitment Group PLC (STAF) up 15% since I bought it a couple of weeks ago.

Depending on where they go when the market re-opens after the holiday, I'm very interested in Communisis PLC (CMS) which on the face of it looks good value and also SafeStyle UK Ltd (SFE) which had a teeny weeny wobble recently.

I remember talking to Fagin about this one about three years ago, since then they've risen 50% and paid lots of quite chunky dividends. I should have bought them then and simply held, like I said, the hard part of 'don't just do something, stand there' is knowing when to do it. 

" . . . accidents will occur in the best-regulated families . . ." ~ Charles Dickens

Well my dears, out of all the trades I took during the last week of April, only PDL and GVC have paid off. I was net £123 down at the end of the 1st month of the competition  (with open positions) but now I am over £1800 in the red. 

PFC had some bad news on Friday which crashed through my stop and had me out losing double my risk. 

Humbug told me a news driven event like this might happen - indeed it's one of the reasons for his change to an investing strategy. Personally I think he's cursed me to try and win more easily - I can imagine him lurking in his sweetshop, casting Sherbet Limes on the counter like magic runes! 

Commodities have been falling, they move so fast and I have certainly found it harder to trade since the end of Feb. hare

However I expect sudden issues like PFC from time to time and of course 'shares can go up as well as down'. ;-) 

I also had some trouble with EVR; wiggled in, wiggled out, wiggled in again and then wiggled out. The day of my last wiggle out (also Friday) Roman Abramovich also bought some shares. It fell nearly 7%, clearly the market loved it - not! 

Last week was my worst week for a while, but I have my long gun ready for a short term rally in commodities. For now I am returning to stocks and trading very short term. 

" . . . accidents will occur in the best-regulated families . . ." ~ Charles Dickens

I hold KAZ and PDL. Looking at BT, MGAM and TSCO

 

Yours Fagin

 

Running Total -£178.30; Humbug's working on a global strategy and says 'there's never been a better time to be a DIY investor'

The joy of placing limit buying  orders is  that you can do them in peace and quiet when the market is closed, so all the pressure is taken away from you.

I simply can't recommend the system enough, its great.

I've placed three trades this evening, one will definitely go through as its a fund purchase, with funds you place the buying order and its filled on the valuation that pertains on the trading day the manager receives your order.

It's a little bit hit and miss and took me a while to get my head round it, as until your order's executed you don't know what it cost you, but my take is that whilst sometimes you pay more than the previous days price, sometimes you pay the same and sometimes you pay less, so on balance it all probably works out even.

The fund I will have bought into on Monday is the Vanguard UK inflation linked Gilt Index. What I'm seeking to do is hedge my bets on the UK Stock Market by getting world wide exposure to other countries markets but also perhaps more importantly to other asset classes.tortoise

There is no direct correlation between UK Gilt prices and the UK Stock Market, Gilt prices are currently showing upward momentum, hence this trade. 

Currently I've got money in Global Energy, The Chinese Stock Market, Global Total Returns, Emerging Markets, US Small Cap Stocks, European High Yield Bonds, Asian Property and Robotics. As the year unfolds I'll be looking to diversify still further as and when funds in other sectors make the swing buying signal we look for.

As a side issue, the big fund supermarkets have brought the front end and ongoing costs of buying and holding funds right down, so its now very cost effective for anyone with (say) a hundred thousand pound portfolio to act as their own hedge fund by both spreading risk and seeking opportunities in many different asset classes. There's never been a better time to be a DIY Investor.

The two stock limit orders may or may not get filled, we'll find out in due course, I've placed them both at Friday's closing price. They are both in quite small but dynamic and fast growing companies.

Both are keenly priced by any reasonable standard with all the things I like, namely a decent track record of rising profits, rising well covered dividends, in the case of one cash in the bank, in the other a sensible debt level in relation to profits and in neither case has shareholder value been eroded by the never ending issuing of more and more shares for whatever reason.

The two are Vertu Motors PLC (VTU) and Staffline Recruitment Group PLC (STAF). Both have recently reported good figures and a positive trading outlook and I've high hopes that my timing of both purchases (if they happen) is good, as always the catalyst for both trades was the weekly pivot signal after recent price weakness. 

 

 

 

Humbug's looking for a happy ending to his toy story - CCT; - £207

Buying and selling shares is a cross between a black art and a science, I've just bought into the Character Group Ltd (CCT), hopefully I've got both angles more or less covered.

First of all the science, or at least the facts. CCT is the country’s leading toy company albeit with a market cap of 'only' £107 million, it’s got the thick end of £7 million in the bank, isn't expensively rated and has just reported that whilst trading post Brexit isn't easy, it expects the results to August 2017 to be in line with market expectations.

Profits have tended to wobble around a bit over the years, but the dividend record is very strong, they have risen every year for the past ten years from 2.55p to 15p last year with a forecast of 19p for this year, the yield is currently 3% covered 3.2 times by earnings.  So far, not so bad.

Then it gets better, a few days ago the company bought back 75,000 shares, so clearly they think the share price is undervalued and at the same time two directors spent just over £61k buying shares for their own accounts, all of which has a nice ring to it.

tortoise

So much for the science, now the black art.

CCT is a volatile little thing, prices can move 10% in a week for no obvious reason which can lead to investor anxiety, but having said that, the three year trend is up 160% and perhaps more to the point the 26 week trend is up 12%, so although it dances around, it is at least dancing in the right direction overall.

Fagin and I look to buy upward pivot points, him using the daily signals our system produces, me the weekly ones.

Last week the price sold off and then recovered, meaning at least in the short term that all the bears were out, as always I've taken this as my pivot point.

CCT is a market maker stock which adds a layer of complexity to the transaction, I struggle to read level two prices but think I may have got this trade right. The spread came in and there was only one offer of the best price so I took these as the signals to pounce and since I did so the price has risen 5p to 520p.

 

Humbug's - £332 and musing about the 1956 Clean Air Act: is he feeling the heat?

I'm down .33% since we started this exercise on April the 5th., our benchmark the FTSE 100 (UKX) is down 1.74% over the same period. Put it a different way, if my results had matched the market I'd be £1740 down.

Viewed like that £332 down is a result, not least as most of it is the costs of buying my current holdings and remember the 'market' doesn't have costs.

The key to what I'm trying to do in running my little mini investment/hedge fund is to keep as much of my capital intact when the market pulls back and then outperform the market when it advances.

Almost like being a proper grown up investor, wow.

I flagged up that I was stalking both Old Mutual (OML) and Prudential (PRU) and barring a mishap was going to buy one or other or both. I bought into both on Thursday when all looked quite good, but they both bled away a bit today and had I been making the buying decision late this afternoon would have passed on OML.

This illustrates the problem we all have as private investors; we don't have the time to sit in front of a screen all day every day.tortoise

This is one reason why I think it’s vital not to chase prices when in buying mode, it’s all too easy to be the mug who buys at the high of the day. Without wanting to sound like a smug git I got sensible prices for both of them, in OML at 197p and PRU 1721p, so no real harm done.

With these latest purchases, in round figures I'm 26% invested with £74k in cash.

Interested to see that Fagin is teaching his gang to trade on eBay as part of their financial education, if they were mine I'd be sending them up the insides of chimneys to clean them as a way of making money. None of this namby pamby parenting round here.

However, I believe that since parliament passed the clean air act of 1956 the demand for small children to clean chimneys is not as great as it was, so maybe just maybe eBay is the better plan. In fact it’s a great plan, if kids can learn to trade profitably they will always be able to make living and that in an uncertain world is a great skill to have. Good luck to them.

Whilst the clean air act of 1956 is history there is still a lesson to be learnt, as investors we really do have to be on our guard with political decisions and indeed politics in general. Just think, if a few more French had voted one way and a few less the other, the run off for President would have been between two candidates who both wanted to take France out of the EU. Imagine what that would have done to world markets and more to the point yours and my money.

 

Fagin's been busy, but fears he can see a tortoise in the rear view mirror!

So my dears, 

Here is my update on progress so far this month. 

Let me start by saying that my hare-like performance has not been achieved just yet. In fact I am already looking over my shoulder to see if the tortoise-like head of Humbug is catching me! 

A snap election caused my empirical plans to go astray but I have jumped in on the back of the French election move and added EVR Holdings (EVRH) at 211p, PDL at 130p, KAZ Mineral (KAZ) at 462p and I'm having another go at Petrofac (PFC) at 845.

GVC Holdings (GVC) is still going strong now and is above 753p as I write. I have moved my stop up to better than breakeven. 

As usual the mantra 'stick to the plan' reverberates through my brain. With the always 100% accuracy of hindsight,  I should've kept the second half of the position in Legal and General (LGEN) as this has started doing the business. If I stick to the system I usually make money! 

 

'Try to think not; and ’twill seem better.’ hareCharles Dickens 

 

LGEN is still massively undervalued as far as I'm concerned. It's going to pay a dividend shortly so I will take the opportunity to get back in on a dip.

This would be a very good time to make money for me right now as Fagin's gang are back at school and costing me an arm and a leg. 

I have taught them how to sell stuff on eBay as planned and so hopefully the little blighters can start paying their own way soon. I can't have them living on a diet of Humbug's free sweets forever! 

I figure if I can have them financially independent by the time they're 18 I will at least find their university jaunt an easier ride! 

 

Yours Fagin

Humbug - Running total -£147 but seeing some green shoots from the pullback

Fagin was saying the other day that he lacked patience, which is why he darts in and out and picks the markets pocket.

I on the other hand am like a tortoise, wandering around slowly thinking grumpy thoughts, watching and waiting.......................................given that as a tortoise I could well live for 150 years I've got all the time in the world so I'll sit something out for as long as it takes.

tortoiseWhich brings me neatly to the two I highlighted that I was stalking in my last posting, they're the two insurance companies, Prudential (PRU) and Old Mutual (OML).

Both have pulled back (see our recent postings about loving pull backs) and have pivoted upward already using our daily signal (that Fagin trades) and unless something goes wrong in the next couple of days will also do so using the weekly signal that I use. Unless there's a nasty shock tomorrow I plan to certainly buy into OML and maybe PRU as well. My thinking is that there's 20% or so in both of these in the next year or so.

Back to Fagin, as you know we are in a one year competition to see who can make the most money in the market using two variants of our system, I'm hoping that we both do really well but that I make say a fiver more.

If this was a virtual contest I'd love every cock up he made, but it's not so I don't, the 100k we're each using is our own money, it was hard earned and it's real, so I'm rooting for him just as much as I am for myself.

'Discipline - the Victory of Happiness over Misery' or 'How to avoid a kicking from Bill Sykes' - Fagin scrambles out ahead of the pullback; now he's sharpening his pencil

 

Hello My Dears,

 

I was very lucky yesterday that the market did not gap down first thing and thus allowed me to scramble out of my Highland Gold Mining (HGM) -£329 and Petrofac (PFC) -£440 positions roughly around my stop losses.

Despite his sometimes grumpy demeanour, Humbug is far too nice a man to be laughing heartily into his long term dividend portfolio but I am embarrassed to say, I have given back most of last week's gains anyway!  

Humility is a key quality in trading. All I can do is go to the market each day and ask it to respectfully fill my bowl. 

Sometimes it says no and takes my money and my bowl! I will ask again tomorrow. 

I'm still in GVC Holdings (GVC) (bought at 728p) as it has not done anything wrong (now 735p) and my stop (now breakeven) has so far held; initial target is 750p. 

It may be worth noting that I should not really have been in HGM or PFC on Tuesday, I front ran the HGM trade on Friday due to a ‘Kangeroo tail’ and if you recall I was nursing my way out of PFC as it had let it run my stop.  Most of the trading problems I have are psychological and occur when I break my discipline and buck my system. This is the area I am working on personally now. I hereby promise to adhere to my system for the next 10 trades!hare

So, love the pullbacks they say. Pullbacks are wonderful provided you’re on the right side of them. 

Now is the time to make the shopping list look at what is in the zone and get ready to get back in for the ride back up when the moment is right. As retail traders, an edge that we have over institutions is we can choose when to get in.  

I notice that no sooner was I wiggled out of PFC it has re-triggered again already!

‘Annual income twenty pounds, annual expenditure nineteen pounds nineteen shillings and six pence, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.’ Charles Dickens, David Copperfield

 

Yours,

 

Fagin

 

- £299 but Humbug's sitting tight and looking for some value

 

Wednesday April 19th.

Running total -£299. The last two days haven't been good for my portfolio, strangely yesterday when the market really tanked did me less damage than today.

Last night I was only down £118 and thought I'd got away lightly, today cost me another £180.

Fagin however is dead right in his latest posting, as traders and investors we have to learn to love the pull backs, otherwise we always pay top dollar for everything and who wants to do that. The key has to be buy cheap, sell expensive.

So pull backs are just part and parcel of the market ebbing and flowing and something we need to accept and profit from.tortoise

Right now I've no plans to sell any of my current holdings, obviously if they continue to fall I'll review that, but as this is an investment portfolio rather than a trading one I don't want to be bounced out of things too easily by a bit of market vibration. So I'll continue to clutch my portfolio to my bosom, actually I don't even have man boobs let alone a bosom, but you know what I mean.

I do however want to buy into any value that this pull back and election uncertainty create. The first two candidates I've identified are the insurers Prudential (PRU) and Old Mutual (OML). PRU is falling away nicely and is coming into the value zone, OML is already there and is close to generating a buying signal.

Both pay what in today's low interest world is a half decent dividend, in the case of OML it's 3.15% covered 2 times by earnings (so in theory fairly safe).

For an investor a dividend of (say) 3% increasing by 10% a year really does make a difference to the return on any shares held for a few years. All the shares on my watch list pay a well covered 2% at least.

'Some people are nobody's enemies but their own'

 

Charles Dickens, Oliver Twist

 

14th April

Well my dears, here we are, I told you I didn't have any patience. 

My plan was to take off half my position at 250p in Legal and general Group (LGEN); I ended up taking off the whole position at 252.60p for another £660 profit before costs. 

I don't think the move is anywhere near finished in (LGEN) but I decided on this occasion in this market condition, not to be greedy and use my keyword 'enough!'

My best and most profitable trades have always been where I have managed to scale out two thirds or half a position at a time. 

One of my mentors (though he doesn't know it) trader David Paul, suggests that one should add to one's winners. I'm certainly not there yet. 

For me, sometimes you have to slip the fat man's Victorian gold watch from his pocket before he turns around! 

I've taken another position of 10,000 shares in Highland Gold Mining (HGM) at 175p, another of my mentors, Dr Alex Elder, told me about 'kangaroo tails' where the price spikes down and then returns to a level of support. I'm front-running a little bit but I believe this has happened in HGM today. The company released figures at the upper end of guidance and Gold itself was bouncing around $1287 when last I looked. I can see no real reason for the spike down outside of the failure to set a new high – the market looking for stops then? hare

I have taken a small position in GVC Holdings (GVC) today too at 728p.

The only bee in my bonnet at the moment is my nursemaiding of Petrofac (PFC), I don't like the price action but it still just about holding the 8 EMA of the lows (an 8 period exponential moving average of price lows) that I  am using as my stop guide here. A close below this level around 885p is my hard stop (the point below I will exit without question).

As promised I will outline the strategy towards the end of the week as my children aka 'Fagin's Gang' are away in Bath. I am sure the 'artful dodger' and his two sisters will manage to put down their big bag of Humbug's complimentary 'sourest of sours' long enough to fleece their auntie Ange for all they can! 

I have been enjoying Humbug's posts in his new found role as 'hedge fund manager', what a great experiment to try - trader vs investor! I may need more caution, I remember the story of the tortoise and the hare! 

Fagin

 

Humbug - + £51 - Slowly, slowly catchee monkey

 

Thursday 13th April

I was going to say following on from my last posting that not only was Fagin's picture taken on a good day but I think it's been air brushed as well...............................................then I saw the bloody picture the editorial team have found for me. There are some drawbacks to being a tortoise I'm finding.

Moving along, I invested in the Sage Group (SGE) and Domino's Pizza (DOM) today, £2k into each. These are exactly the sort of investments that should enable me to hibernate while they go up in value. SGE is up 70% in three years whilst DOM is up 80%. They also both generate a good strong cash flow, some of which is paid out in half decent dividends that are well covered by those earnings.

Now this I think is interesting and clearly demonstrates the two different approaches Fagin and I are taking.tortoise

He is using the daily buying signals our system produces; I am using the weekly/monthly ones.

SGE produced a daily buying signal last Friday (7th April). Had Fagin taken it with a typical trade size of (say) £20k it would have produced a banked profit of £600 that closed out today.

I've bought in today using the weekly buying signal, now this bit is very 'if if if' but if the share performs over the next three years as it has over the last three, including dividends I stand to make some £1550 using £2k of capital.

So we really are the tortoise and the hare, he would have made £600 in a week with £20k on risk in the market, if SGE works out well for me I hope to make £1550 over three years with £2k on risk.

You pays your money and takes your choice, my potential profit is much larger and my risk is much smaller, but on the other hand it's there for much longer.

 

Humbug Starts Strongly - Running Total + £135

 

Wednesday 12th April. Running total +£135

I've read Fagin's posts with interest and could I just say that that picture of him was taken on a good day.

On the subject of good day's I too don't want to get cocky but my portfolio is just beginning to come good. Fagin will be reporting profits and hopefully not too many losses as he actually banks them, because mine is currently a longer term portfolio I'll be reporting the running total which may or may not be banked.

As I posted the other day, the plan is not to worry about balancing the portfolio at this stage, it's all about fairly aggressively looking to buy into value as upward momentum is manifesting itself and then ride the wave.

Using the metrics I highlighted as the selection criteria and our weekly buying signals to pick my entry points  I've currently £2k invested in each of the following shares:

tortoiseRenew Holdings  (RNWH) up 7.59% on the week
Shaftsbury (SHB) up 5.27%
Greencore (GNC) up 3.68%
Numis (NUM) up 3.13%
WPP Group (WPP) down 0.12%.

I'm happy with all of these and am looking to buy into Domino's Pizza (DOM) and Sage Group (SGE) maybe tomorrow.

To spread risk and allow me to invest in other asset class's around the world I've £1k invested in each of the following funds:

Legg Mason Royce US small caps up 2.19% on the week
Investec Global Energy up 1.55%
First State Asian Property up 0.86%
Templeton Global Total Return Bonds up 0.86%
Pictet Robotics up 0.17%
Axa Pan European High Yield Bonds up 0.14%
Henderson Emerging Market Opportunities flat
Old Mutual China Equity Fund down 0.99%.

£18k on risk in the markets, £82k in cash. 

'Please sir, can I have some more?......'

 

OK, it's April 11th and I  am off to a reasonable start.......

I took 10,000 shares of what Humbug calls 'the gift that keeps on giving' that is HGM on Monday and sold out today for £495.05 net of costs. 

I only wish I could do this every day! 

Now let's not get excited or cocky as it is very early doors and when I am excited or cocky that's when I can do the most damage to my account! 

Over the year Humbug is going to pay a lot less in costs than I as I expect to get wiggled out way more often so I am pleased to get some blue ink already. 

I also have 10000 shares in LGEN at 246p on Monday. It's been in a pullback and a volatility squeeze for about 10 days, undervalued by any reasonable metrics and I do hope this one is going to fly up the page! My initial targets are 250p and then 255p. My stop is at 243p.

I have one final position on in Humbug’s golden goose PFC, I took £253.75 in profits on half the position before it gapped down on me. I am nursing out an exit which I hope to now be breakeven or better overall.

While I like the UK market condition and its current divergence in the US, I am cautious for the next few weeks and I have a close eye on the market and my stops.

I am pretty sure Humbug feels the same.

Later this week I will put up some information about my research, my edge, risk management and entry and exit techniques but for the time being here is my daily 7 step trading routine. 

Fagin's Daily Routine: 

  1. Plan exits on existing positionshare
  2. Determine frame of mind and availability to trade
  3. Which direction is the primary trend
  4. Look at my personal basket of stocks
  5. Look at my strategy scans
  6. Work up my trade plans
  7. Set orders or alerts
  8. Double check for earnings, news influence et cetera

The other thing I do is keep a regular trade journal of entries/exits, shares bought and sold, strategy used, et cetera. 

Boring Disclaimer: Please remember I can share my trades with you and while they may be the right selections for me, they may not be right for you so please do your own research and always use immaculate risk management. I am not providing tips, only educational information and my experiences. 

 

That’s it for now my dears, more later this week.

Fagin

'You got to pick a pocket or two……'

 

Monday 10th April

Dear All,

My trading partner Humbug calls me Fagin because I like to pick the market's pocket…....

I have been told I am of an agitated nature, I love my profits my dears and I can't stay patient for very long.

Whilst I am not a day trader, I like to swing trade from a few days to a few weeks depending on the market condition. My aim is to build my stake incrementally with minimal drawdown!

I've been trading for about three years and over this last year, using a probability, system based, TA approach, from March to March, I have increased my pot by 30%.

So, Humbug and I are usually aligned when it comes to our trades; we use similar entry and exit triggers, similar tools and have a similar philosophy when it comes to the behaviour of UK stocks.hare

However we have recently had an amicable 'bullish divergence' of opinion and have decided to put our differing theories to the test.

Hence whilst I normally remain anonymous, we have agreed with Steve to both post our ideas and our results transparently on the DIY investor site for your horror, amusement and hopefully your profit!

We have agreed to each use a £100k real money trading stake and we will trade this over the next year. Let's see what performance we can achieve.

For myself I will be swing trading as above, whereas Humbug has decided that a longer term investment strategy may prove more lucrative.

As well as posting our results we have agreed to also share our philosophy, strategy and rules as it may be of interest to you and other traders especially if those experiencing head-scratching losses or lack of consistency; after all, we've all been there!

There will be stock selection criteria rules and these will follow along with our initial trades and healthy banter!

Trader or Investor?…..The market will decide!

‘If you do it well, a pound, my dear. One pound,’ said Fagin, wishing to interest him in the scent as much as possible. ‘And that’s what I never gave yet, for any job of work where there wasn’t valuable consideration to be gained.’

C Dickens - Oliver Twist

Humbug's off to a stinker as he looks to top Fagin

Saturday 8th April.

 

I'd like to report that even after just three days I'm well in front of Fagin and the investment portfolio is hundreds of pounds up. Yeah I'd like to, but sadly I can't.  I hit the ground running and hit is the operative word as in splat face down as in £199.49 down in three days. So lets look at this logically and calmly, two hundred quid down in three days equates to an annual loss of just over twenty four thousand pounds and that's with only £17k invested so far, who's a clever boy then?

In fact a tiny loss in a few days is neither here nor there, the advantage of investing over trading is that you don't need to worry about a little bit of market vibration, also half the loss is costs (which obviously front load) so I'm not planning to cut my wrists just yet.

At this stage of the game I'm not looking to have a balanced portfolio of shares, what I did was put together a watch list of those with some simple but safe metrics.

tortoiseThe criteria is that they pay a 2% (ish) dividend or better and more importantly that that payment is covered at least 1.5 times by earnings, that they have low debt also in relation to their earnings or better still net cash in the bank and finally that the price isn't stupidly volatile. For what its worth, of the many thousands of companies listed in London only 134 currently measure up to those not too extreme rules. The plan is to buy when they show upward momentum and hold for as long as that trend continues, banking the dividends along the way.

I'm also investing in funds to spread my risk in three ways, one to have a much wider base of securities, two to be able to access all world markets, three to be able to invest in different asset class's. Again in these early days I'm not looking to have a balanced portfolio, I'm simply looking for momentum. If it's hot to trot I want my money on it's back, simple as that.

I'll be deliberately holding cash as a way of managing risk, the balance will rise and fall depending how bullish or bearish I am. The long term aim is to build a 'proper grown up' investment fund.

Sounds simple doesn't it? Yeah right, in the real world it'll be anything but.

I'll update again in a few days and will list what I've bought so far and review how its all bedding down.

D2 Interactive