How our fund works and what it costs.
Trading cycle: from buy to sell (or sell to buy if we are short) is anything from a few days to a few weeks.
Lets say you have £30,000 to trade. In this example, we will trade no more than £600 on any one stock or share. And during any one cycle we will trade some 10 to 15 times concurrently.
Our strategy is to find intermediate trends. We get that right about 8 times out of 10. That sounds okay, but is spoiled by activation of our stop loss by larger than acceptable fluctuations in the share price; and by spikes in share price, including so-called ‘tree-shakers’ – don’t forget the hoops and loops – they can also be devils! The last two I made up, but you get the idea.
However, where the spikes and the like are going to affect us a couple of times a year, to our advantage, we will have occasion to surf an intermediate trend. Hopefully, two or three times a year. In other words, we will stay in a trend for more than one cycle. Maybe for several cycles, and this is where the true profits are. Such a trend, even with one trade, can pay for all those pesky spikes and whatnots in one go.
Our operation is three fold:
1. Find correct entry and exit points primarily from stocks and shares within the S&P 500 and FTSE 350.
2. Trade with regard to the share value or, as Warren Buffet calls it, the ‘margin of safety’. In other words, if we are taking a long then we want the share to be undervalued. Conversely, if we are taking a short we want the share to be overvalued.
3. Trade within our money management criteria.
Our trading vehicle of choice is a spread betting account. We use IG. Unlike a normal share trading account, a spread betting account is tax-free. (Many people use these accounts to bet rather than trade. Those that bet, I have read somewhere, lose some 8 or 9 times out of 10).
What it costs you:
As the account is leveraged we pay a fee when we trade over a single day. This is called a daily fund bet (DFB). A DFB is our trade of choice due to the trading time frame we follow. To help cover this we deduct 2.5% of the final fund amount.
Also, we deduct the same percentage of profits up to a maximum of 20% (For example, if profits are 15% we will deduct 15% of those profits. If, on the other hand, profits are 50% we will deduct only 20% of those profits).
In other words, let’s again say your fund starts with £30,000 and, after one year, is at £50,000. Your costs are: £1,250 (to help cover the DFB), and £4000 (which is 20% of your profits). What you would get back is £44,750 (£50,000: less £1,250 less £4,000).
For buy (long) trades IG charge the one-month LIBOR plus or minus 2.5%. This applies for sell (short) trades together with a borrowing fee. Dividends are credited if long and debited if short. For simplicity, we deduct a flat 2.5% of total end-of-year fund. This is less than the true costs to us and therefore in the case of an account that finishes even, or slightly above even, this will normally be a loss to us in terms of costs.
How long does the fund run?
A fund runs for one year. Two months before expiry you can decide to cash-in or rollover. In either case costs are subtracted annually.
We can trade only 4 funds not including our own. A fund can be made-up from a group or from an individual. Each fund is to be a minimum of £30,000.
A margin call is not your responsibility. However, your attention is drawn to the disclaimer page in slowtrader.com
Note: Slow Trader Fund, 23rd July 2015, only has the DFB 2.5% charge. However, going forward from 23rd July 2015 the profit charge will also apply for those that wish to rollover and or place additional funds.