My 99 trades

[nomore4s]

Thanks skc.

On the other hand, as I use $15K as my risk management figure

This answers my next question.

The downside was that this had some impact on the way I move stops up - I perhaps moved stops up faster than they warranted just so that this total amount at risk looks smaller.

From my experience you will never be entirely happy with your exits. You are always going to feel you are getting out too late or too early, having a re-entry plan for stocks that stop you out and then continue on might be a good idea.

That SUN chart is a good example of where a re-entry plan might work. Stopped out on that long tail like that indicates there might be more left in the trend.

 

[Albi]

Yes. I had way more than $15000 in the account at a time. The peak "funds employed" was probably around $55K. The average was probably $30-35K so can be done on a margin account if one so desired. I didn't use CFDs.

On one hand, you could probably argue that the P/L of $13K was on the $30-35K instead, which makes the return % of ~40% far less impressive but more reasonable.

On the other hand, as I use $15K as my risk management figure, I would say the RAROC (risk adjusted return on capital) is still 78%.

I also keep a close eye on total amount at risk (i.e. entry price - current stop loss price) at any one time. And I usually manage that to be ~10% of the risk capital. I think this was a good comfort check, that even if I was holding $50K of stock and all my stops get hit at once, I am only down $1-2K in terms of capital (but also a lot of open profit).

The downside was that this had some impact on the way I move stops up - I perhaps moved stops up faster than they warranted just so that this total amount at risk looks smaller.

Hi SKC
I also have an account in margin lending and there I can borrow arroung the 40% of my total portfolio. It keeps changing as as I buy or sell stocks, depnds on value of stocks also. My credit limit is also quiet good. But I am always afraid of using that amount because of risk.
My question is can I buy share and sell on the same day from that amount?For example I am holding few stocks and my margin lending shows that I can borrow upto $10,000. If I buy and then sell the shares from this amount on the same day, will it be naked selling or i can use this amount. I am using comsec.
Thanks in advance.
Albi

 

[skc]

Hi SKC
I also have an account in margin lending and there I can borrow arroung the 40% of my total portfolio. It keeps changing as as I buy or sell stocks, depnds on value of stocks also. My credit limit is also quiet good. But I am always afraid of using that amount because of risk.
My question is can I buy share and sell on the same day from that amount?For example I am holding few stocks and my margin lending shows that I can borrow upto $10,000. If I buy and then sell the shares from this amount on the same day, will it be naked selling or i can use this amount. I am using comsec.
Thanks in advance.
Albi

What makes you think I'd know? I last used comsec 10 years ago and not with margin.

But before you check with your margin provider, make sure you are comfortable with the risk first!

 

[Mr J]

One thought I have is that it seems you often had quite a few correlated trades open.

 

[skc]

One thought I have is that it seems you often had quite a few correlated trades open.

What do you mean by correlated? I suppose all stocks are correlated to the wider market for starters...

I do run a Excel pivot table of my open positions and look at position market value and risk by sector. I don't have any hard rules but I keep an eye on any sector concentration.

I also exercise some control on the positions I open. E.g. I may have MGX, MMX and AGO on my pending orders. If one of them is activated I would probably cancel the other two as they are all second tier iron ore stocks.

About a month ago I longed both LGL and NCM plus a junior gold in NGF... in that case I spread total 2.5% risk over the 3 stocks so I am not overly exposed to gold.

In order to do this I do spend a little bit of time finding out what a company does at a high level...

 

[Mr J]

What do you mean by correlated? I suppose all stocks are correlated to the wider market for starters...

I don't know how you manage your positions, but it was just a thought, since correlation can mean risk is far greater than realised. A lot of people found that out in '08 when their 'diversified' portfolios fell apart .

 

[nomore4s]

One thought I have is that it seems you often had quite a few correlated trades open.

Mr J while I can understand where you are coming from with this due to skc's results but you must keep in mind anything in this market that started to trend pretty much kept trending.

I don't know how you manage your positions, but it was just a thought, since correlation can mean risk is far greater than realised. A lot of people found that out in '08 when their 'diversified' portfolios fell apart .

For a trader like skc I actually think being overexposed to a sector or type of stock is a good thing - if done correctly. With an average holding time of 24 days being diversified isn't such an issue.

I have found with my trading if I end up with a large exposure to a sector or group of similar stocks it is because that sector is hot and trending strongly - think of the banks since about May, being overexposed would have brought great rewards.

The way I manage my risk is not to enter all the trades at the same time but to use different stages in the trend to enter that way all my stops are not at full risk. It is the risk of all your stops getting hit at once that increases when trading the same sector, so if you can manage this by staggering your entries you can increase the potential rewards but still control the risks.

 

[Mr J]

Mr J while I can understand where you are coming from with this due to skc's results but you must keep in mind anything in this market that started to trend pretty much kept trending.

I know. My problem with it is that correlation is a doubled-edged sword. It's great when the market is trending, but if we're caught on the wrong side of a strong move, it could turn all of those small 2% positions into something more like a wager for 20% of our capital. I know this would be a rare event, but I'm still wary of it. I suppose the idea is to make enough during the good times to be able to take a loss like that, or if possible, not be in a position to face the loss in the first place?

 

[skc]

I don't know how you manage your positions, but it was just a thought, since correlation can mean risk is far greater than realised. A lot of people found that out in '08 when their 'diversified' portfolios fell apart .

The total risk was always in check... And the total risk actually assumed no diversification at all, as all stops in all sector gets hit at the same time. So that should be as bad as they can be (minus slippage and gaps).

People's diversified portfolio fell apart because they were exposed to overall market risk... diversification is not helpful on that front.

I know. My problem with it is that correlation is a doubled-edged sword. It's great when the market is trending, but if we're caught on the wrong side of a strong move, it could turn all of those small 2% positions into something more like a wager for 20% of our capital. I know this would be a rare event, but I'm still wary of it. I suppose the idea is to make enough during the good times to be able to take a loss like that, or if possible, not be in a position to face the loss in the first place?

You are ignoring the fact that most positions and stops are staggered. 10 positions at 2% per trade doesn't equal 20% risk if 5 stops are at 1R profit and 3 stops are at breakeven...

 

[Mr J]

I'm not ignoring it, which is why I said I don't know how you manage your trades . I'm not being critical.