CFD Trading Report Monthly Wrap, a detailed look at where we made and lost money during the month.
We report our performance on a monthly basis, dividing our trades into three portfolios, Australian Stocks, UK Stocks, and Global Markets, which comprise commodities, currencies, bonds, and US indices. We report overall portfolio results for each of the three trading accounts, each in their home currency, AUD, GBP, and USD.
For each trading portfolio, we will provide:
- A table of the closed trades from the month, with a combined Profit and Loss (P/L)
- A Portfolio Performance Table. The information in this table is rolling, i.e. the trades for the month are added to this table on a continuous basis. This table contains trades that were opened after 1 Dec 2008.
Below are a few notes which provide further explanation.
Current Account Balance – includes all closed trades from 1 Dec 2008 to the current month end
Overall Return – Total P/L to date, as a percentage of our starting balance
Win % - Percentage of trades where we book a profit
Scratched Trades – Trades where we were stopped out at break even
Max % Drawdown – This is the maximum amount, in percentage terms, in which our account decreases from our maximum equity line. Graphically, it is the maximum distance between our Maximum Equity (Pink) Line and our Current Account Balance (Blue) Line in the chart below.
AU Equities – February 2010
The month of February saw a wave of bad luck knock our recommendations. Early into the month, the ASX200 was looking rather shaky to say the least. A short term downtrend emerged, with a bearish moving average cross that saw the psychological 4500 support level breached. The local bourse was on the brink for further falls.
The ASX200 touched a low of 4464.9 on February 9. This was the very same day we entered short on CTX, GFF, ALS and AVO. Two days later, much better than expected employment numbers surprised the market. This caused a positive change of sentiment which resulted in the market swiftly changing direction to the upside. Unfortunately, our short positions were victims to this change in direction.
Mid February saw the local bourse encounter strong resistance at the 4700 level, which resulted in a sharp 100 point selloff. We took two additional short positions on EQN and SGM and a minor hedge long position on the ASX. Once again, market sentiment proved too strong and the whipsaw-like price action stopped us out.
This served as a pertinent reminder that as short term traders, we must strive to limit our exposure to sudden changes in market sentiment. The use of stop losses is critically important.
We acknowledge that February was a tough month and we thank you for your continued support. The Fat Prophets Trading report interprets the actions of market participants and their impact on the formation of trends. Our mandate is to identify suitable short to medium term trades.
As traders our goal is to capture winning trades. However, we must also be prepared to stick our necks out and suggest an outcome as opposed to trading with the crowd. This is what we have done, or are doing with our trade recommendations.
Since inception, the Australian Equities account is currently sitting on a capital return of 29.42%, with a winning strike rate of 52.63%.
Our performance versus our relative benchmarks over the same period of measurement is below:
1). Hedge Fund Market Directional benchmark: 29.53%.
Underperformance: -0.11%.
2). Hedge Fund Macro Index: -9.21%.
Outperformance: 38.63%.
Closed Trades for February 2010
Portfolio Performance from 1 Dec 2008
Equity Chart from 1 Dec 2008
For the benefit of newer members, it is a good time to explain the Equity Chart below, which is a graphical representation of our trading results. The blue line is our equity line, and is updated every time a trade is closed out, while the pink line shows our equity maximum line. Put another way, this is the highest level our trading account has registered.
The account remains below our equity maximum line which was registered back in May. This is partly due to the current trading environment.
As a reminder, the aim of the Fat Prophets Trading Report is to identify short-term opportunities in trending markets, i.e., whether the direction is up or down, we need markets to be moving to make money. Even the savviest trader will struggle to make money in a sideways market!
When observing this chart, and with an appreciation of our trading philosophy, it is not surprising that the account has been treading water over the past three months. In times like this, it is important to remain patient and disciplined. Over trading will only chew through capital and reward your broker.
UK Equities – February 2010
February was a good month for the UK report despite continued choppy trading conditions. We managed to capture a good proportion of the early sell off capturing gains on short positions such as KGF, OML and the FTSE 100. We then managed to quickly reverse our position to the long side, capturing a quick gain on TLW.
We however underestimated the magnitude of the bounce initially believing it to be nothing more than a short relief rally prior to a continuation of the trend to the downside. As such we reloaded our short position too early with short trades on the FTSE, BLND, BARC and KGF.
Closed Trades for February 2010
Portfolio Performance from 1 Dec 2008
Equity Chart from 1 Dec 2008
Global Markets – February 2010
The Global Markets portfolio finished the month almost unchanged. We booked a profit on our short AUDUSD trade and a lost on the GBPUSD short trade. This leaves us with a 50% strike rate for the month.
Since inception, the Global markets portfolio has returned 25.80% on capital, with a winning strike rate of 65.12%.
Closed Trades for February 2010
Portfolio Performance from 1 Dec 2008
Equity Chart from 1 Dec 2008
The Month Ahead
Looking forward to March it will be crucial to see if the FTSE100 and other major indices will be able to break convincingly to higher highs. This will signal a continuation of the rally. Or alternatively should we see a failure at this resistance level that results in sharp selling with wide participation, then we can play the downside.
From our point of view, as trend traders we would be happy with either of these outcomes. As long as this lengthy consolidation that has been in effect since last October comes to an end.
Prosperous Trading!