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Finance Blog: Is There Any Science in Financial Trading?
Financial spread betting has potential for high gains, but why are people generally so unsuccessful at it?

Trading Diary January 2016

1/2/16:I became so disillusioned with my trading, that it is only now weeks later, that I have been able to face updating my diary. Unfortunately, my long position was caught up in the market turmoil, but I just let my position run and run. At one point the position was over £ 1000 down but I refused to budge. The market turned and the paper loss reduced. I was tempted back into trading again, just making one or two trades in addition to keeping my long position running. This wasn't entirely successful, as the shadow of my long position seemed to be over all my trades. In the end, I closed my long position with a loss of £519.

Almost straight away, I opened another long position, this time from 5863. the market increased quite quickly and by the last trading day of January, I would have recovered my losses. Unfortunately, I chose to close my positions periodically, as well as trading further. I have seen this time and time again: if you leave your trade alone, it eventually comes good, at least with a product such as the FTSE100. So on 29 January, I could have closed my original long position of 6118 for a modest profit.Instead I have lost several hundred pounds on the month. The point is that when you have a position showing a significant profit, the lure of closing it is overwhelming. I don't claim that there is anything new in this: it is the age-old concept of running your wins and closing your losses early.

The main point within the last week is that I have learnt some significant lessons in the "school of hard knocks". As noted, there is nothing new here. All these concepts are described in my book "Day Trading for Profit". Nonetheless, it is worth reiterating the point of closing losing positions early and letting profits run. Certainly since closing my major losing position, I have been able to turn back some of my losses and January as a whole now does not look too bad.

There are two other lessons to be learnt here. The first is to trade sparingly and once a trade is entered into, commit to it. There have been too many times when I have been long, for example, my position has gone into a loss, I then close it only to find the market turn. I then go short only to find the market turn a second time. So I end up losing money in both directions. A consistent diection of trading avoids this sort of pitfall. The second lesson is perhaps to pay more attention to the multi-day trend. If the multi-day trend is down, then going long even on short timescales is potentially ruinous. This is often easier said than done, which is of course amongst other things why market trading is more of an art than a science.

Previous Months' Accounts

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Website revised by John Austin, 1/2/2016. © Enigma Scientific Publishing, 2016.