We are up 5%.

The markets have been exciting. We were right to go short of this trading period. A few lessons along the way. Soon after I blogged last month, within a couple of hours actually, we took a hit from Carnival. You can see below how the share spiked up. Marked by the arrow.

Our stop was just at the top of this spike. However, I immediately re-traded the share to go short, and as you can see, this was correct. The lesson for me wasn’t necessarily the stop position, that was one of those things, it was more than I had invested in Carnival PLC (London Stock Exchange) and Carnival Corp (S&P 500). Both shares are intrinsically linked. When one spiked, so did the other; this meant our risk wasn’t 2% but 4%.

Our fund dropped to 8% below. From this low, we have achieved a 16% increase this month to be 5% up. Without the Carnival error, we would have been much higher. To that end, I have taken it a step further and, unless a good reason not to, only trade one share per sub-sector at any one time; this is because share price movement within their subsectors tends to be similar. If one drop quickly the whole subsector often drops quickly. It’s all about risk management.

Here are a few other trades we took this period: (We went short so entered at the top arrow and exited at the bottom arrow)

You will notice that we don’t try to judge the tops and the bottoms. I did, however, exit too early on many, this is a skill I am working. But a profit is still a profit! Each of the trades made us more than £350.

As the market neared the end of the down period, we sold out completely. We are now, albeit with some caution, only taking trades to go long, i.e. the market is moving, somewhat hesitantly, into an upward phase. This upward phase may be brief or prolonged. But as we are short to intermediate trading that is not so much a factor.