Robbie Burns’ Trading Diary
But... on a bad day it is possible Ptec could head back to support at 300. So, I need to place a stop to get out of the trade quickly if it goes wrong. But where? I can’t set it at 320 where I would like, max loss £100 because I noticed at 8am it opened at 320-333. The stop has to be set away from an early spike out. 315 should take care of that. Max loss £150. If the stop gets hit, I can try the trade again, but this time somewhere near the 300 support area. And, most importantly, I haven’t lost much.
So I could set a trailing stop of 15p, or manually raise the stop from time to time as it goes up. If it hits 350 and falls to 335, I’ll be out with a £200 profit. However if my trade plan works out, and it gets to the 390-400 area, I can sell and take my £1,500 profit. I’ve used a rolling daily spreadbet so there is a small daily cost. But peanuts. And there is an extra possible bit to the plan. It gets to 400 but level 2 looks strong, there are plenty of buyers, maybe it will break out.
I can also use Level 2 just before the market opens to judge the likely opening price and check that the 315 level won’t be hit.
So I could sell half the bet, banking £750 and let the rest run if it should break through 400 and do another 50 points to the upside. I am still in the game running a profit and adding another £500 potential profit.
Okay, so now what happens if the share rises? Well, I can gradually raise the stop up under the price, but remember the spread early doors can be 13p.
And all this set up is a bit of common sense, a bit of looking at the order book, a bit of looking at a basic chart, and a bit of tea and a bit of toast! Could anything go seriously wrong? Well, yes.. it’s not a guaranteed stop, so if Ptec issued a warning overnight I could get caned. However it’s unlikely and this trade has I think a good risk-reward ratio. Indeed I can go off on holiday now and let the trade run. May it lose me £150 or win me £1,500 or somewhere in between? Deal or No Deal? Tune in next time, folks and see what happened... Robbie
July 2012 | www.financial-spread-betting.com | 71