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 – May 2010
The ASX200 touched a low of 4175.7 on May 21, representing a decline of -13.14% intra month. Some ground was found towards the later part of the month, which saw the ASX200 close at 4429.7, down – 7.86% for May.
The ASX200, 60 minute chart below displays the strength of the sell off and the importance of the 12 and 72 period exponential moving averages in providing support and resistance. This was particularly evident on the corrective upward move which was capped in mid May at 4652.80. In addition, this momentum indicator is great for gauging market direction.
We closed out of two recommendations in May, Aurora Minerals and Coeur D’Alene Minerals. With respect to our Aurora Minerals recommendation, we initially saw a swift move in our favour before the announcement of a capital raising. This saw Aurora decline to a low of $1.00 during late April. The introduction of the Henry Tax review (RSPT) was also a negative. Aurora traded lower executing our protective stop loss and closing our trade at a 1% loss.
Our long entry into Coeur D’Alene resulted from an announcement of solid results. Our desired entry price was at $19.35, however the market gapped higher on the open, which resulted in our entry price of $20.00, as a result of slippage. Coeur D’Alene Minerals continued to trade higher over the next few sessions before the whole market commenced its nose dive. We widened our protective stop loss to allow for some churn, however the velocity of the market free fall executed our stop loss, closing our trade.
Closed Trades for May 2010
Portfolio Performance since 1 Dec 2008
Equity Chart since 1 Dec 2008
For the benefit of newer members, it is a good time to explain the Equity Chart above, 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 – May 2010
May was a strong month for the UK trading report as we managed to bag a number of winners to finish the month up 8.84%. Out of the ten trades for the month nine were winners. The key development that enabled this strong performance was our decision to rely a lot more on the SMS alert service for executing our trades. If you do not receive the SMS alerts you should contact your account manager and ask them to add you to the list. This service is currently free for a trial period.
The use of the SMS alerts enables us to execute our trades at opportune times during the trading day rather than having to leave orders to the open that are filled at the open. This more efficient execution facilitates us getting into profit on positions much earlier which means we can tighten stops to take small gains. Where before we were taking losses. It also allows us to react more effectively to market turns which we did very well during the month.
Looking ahead we will continue to use the SMS alerts to manage our positions and expect this to help us continue our strong performance. Although nine out of ten winners is not likely every month, we will still endeavour to find as many winning trades as possible while managing our exposure very tightly using hedging by trading both long and short during times of uncertainty.
Closed Trades for May 2010
Portfolio Performance since 1 Dec 2008
Equity Chart since 1 Dec 2008
Global Markets – May 2010
The dreadful month of May saw the Dow Jones and S&P500 shed -7.92% and -8.20% respectively. With global equity markets in tatters, the Global Markets portfolio managed to return a small profit, but more importantly steer clear of the equity massacre.
We recommended two gold trades, one making us money, whilst the other costed us capital. The net effect was a positive number.
The winning strike rate on the Global Markets portfolio shifted a tad higher to almost 60%, with a portfolio return since inception of 31.84%.
Closed Trades for May 2010
Portfolio Performance since 1 Dec 2008
Equity Chart from 1 Dec 2008
The Month Ahead
Looking forward to June, the Global Markets continue to be volatile. The Dow Jones continues to flirt with the key psychological 10,000 level. The short term trend remains down, only a confirmed formation of a base pattern would see a shift to an upward move.
Most global equity indices are in short term down trends, coupled with momentum favouring the downside, any major move to the upside will be slow coming. A continued streak of US economic data is required for the shift of positive sentiment to follow.
Should the Dow Jones break below the previous low of 9,757.55, we should see an accelerated move lower. This will present itself with some decent shorting opportunities. However, should the 10,000 level hold and a break above the 10,315 high occur, a swift move higher towards the 10,700 region is on the cards. This in turn will drive the other equity markets higher and thus present us with potential long opportunities.
On the flipside, should neither of the above scenarios unfold, expect another month of choppy trading. In that case, continue to read our daily comment and watch lists for daily updates on the market conditions.
Prosperous Trading!