Slow Trader

Tag: Peter Lynch

  • The Long, the Medium and the Short

    There are many different views, for lots of good reasons, as to what defines a trade period. But let’s try this:

    Day trading, as the word suggests, is a trade that is entered and exited within the same day. Mostly this will be technical trading, but could be news or event based.

    Short-term trading is again primarily technical; but could include fundamental, news and event based criteria. Usually one day out to several months.

    Medium term could be 9 months (as defined by Peter Lynch as the period beyond which fundamental information provides all the influence) out to several years.

    Between medium term and long-term we see a gap. A sort of no man’s (or women’s) land.

    A large correction, substantial pull-back or crash (call it what you will) happens between 7 and 15 years. Historically not before 7 years, but could be more than 15 years.

    So, lets take 15 years as a guide. For our ‘long term’ investments to survive, to grow, they may have to outlast a couple of crashes. That takes the longer term to 30 years, or thereabouts, depending on the date of purchase of the investment relative to a previous crash.

    It makes sense therefore that investment money that is needed for a pension ought not to be invested over the medium term some 7 to 15 years from a previous crash.

    2008 was our last crash, so between 2015 and 2023, or until the next one, it might be prudent to only invest short-term or longer term.

    And, we would say long-term only with excellent value equities probably purchased prior to 2015.

  • Slow Trader Diary – Week 26

    One step forward, followed by one step back. Or was it the other way round?

    When trading (or managing) a leveraged fund there is no hiding. Unlike ‘normal’ funds where poor investments can be ignored under the (incorrect) pretence that the share price will eventually return.

    Often it doesn’t. And the loss is rarely admitted to – how many pension funds still hold Lloyds Bank since before 2008? The theory being that the offending share investment is not a loss until it is sold at a loss.

    Peter Lynch – arguably the most successful fund manager – in his books, tells us of investments he still holds today – from decades ago – that will never recover to previous values.

    A leveraged fund on the other hand, is brutal. If you go down a fraction you sell. You take your losses early is the mantra. Your failure is known right away. And you will have failures. Its part and parcel of the game.

    Here are my failures (and win) this week: failure plural, win singular.

    Firstly, we paid £24.79 this week in long interest. This is a charge IG make for carrying DFB (Daily Fund Bets) over one day. Day traders – those that don’t carry trades past one day – would have nothing to pay.

    FX AUD/USD – £480 loss. Not my finest hour.

    Halliburton – £558 loss.

    Snip20150627_10

    We bought at the green arrow. Perfect, a 50% retrace and good price action. However, I (foolishly and unknowingly at the time) broke my rule of going against the trend. It was only clear to me after the share price went lower and stopped out that we were, indeed, trading against the recent trend. We had a lower high. Okay, it could be argued that the lower high was slightly hidden until the next move…? But still not a good trade.

    Under Armour Inc. + £667.

    Snip20150627_11

    This had everything we required. Trend, retrace and price action. The target price was set at purchase. This was a 3 to 1 trade. Meaning that we made 3 times more than our potential loss.

    Should I have set a higher target? Maybe. Only time will tell. The target was my call at the time. And I still stand by it. We are short term traders after all. If a new high is made another buy opportunity will always present itself.

    Trades we are currently in:

    CLS Holdings. – 51.7 points down. We had sold this share at break even and bought again at a lower price. Not a great strategy to chase a share price down looking for a buy point. However, the chart and the fundamentals are good.

    Snip20150627_12

     

    ITV PLC. + 12.3 points up.

    Snip20150627_13Our target is a new high with ITV. Fundamentals are good too.

    Moneysupermarket.com + 15.9 points up.

    Snip20150627_14Our target is to simply match the previous high with this one. The big drop down, shown on the chart, leaves me a little nervous to take this share to a new high. Also, we have moved our (non guarantee) stop up. For a share such as this – one that has large moves – a guaranteed stop would (in hindsight) have been a good option.

    Monster Beverage Corp. + 1137 points up. Don’t be confused by the amount of points. As US stocks are often much more expensive than UK shares we have large points movements in our US trades. However, in the tradition of good money management, we have a trade amount that matches the risk. For Monster that, in this case, is 0.7 pence per point. (In the case of Moneysupermarket, for example, it is £20 per point).

    Snip20150627_15

    Pace. – 9.1 points down. This is a funny share chart and one that I will look to exit.

    WPP. + 2 points. WPP is now trending down, so I will watch very carefully when the market opens on Monday to sell this share.

    That is it for this week. As usual, I will post the fund position overall (which is done monthly) in the new month, probably next week. Have a great weekend.

    B