Stop Orders - The Video

I've created a short video to introduce my new book on Stop Orders.

In the video I show a concrete example of pyramiding into a position while using manually-trailed stop orders to manage risk and secure increasing profits.

Here it is:

If you like what you see, you can buy the book from Amazon.com, Amazon.co.uk and many other stockists including the Global Investor Bookshop.

How to: Make a 3000% Return in Six Months

In this blog I've shown you the progress of the example spread betting portfolio that returned more than 3000% in only six months, and I've hinted that this was achieved through a combination of position sizing, leverage, stop orders, and pyramiding.

Here are my notes on how these key concepts fit together:

Position Sizing

The minimum position is established initially, for example a £1-per-point spread bet. Positions are only added to when this is possible at no additional risk because some profit is locked-in by the stop order.

Pyramiding

Subject to Position Sizing above, positions are 'added to' as they trend upwards. Thus: the longer the trend, the bigger the position size, and the higher the profits.

Leverage

Ideally this approach practised in a leveraged account using Spread Bets or Contracts for Difference (CFDs) so that many positions can be established with small stakes. Leveraged accounts also tend to allow you more funds for trading by freeing up margin as your stop orders are ratcheted up.

Stop Orders

Stop Orders are of course the key to all of this. They are used to minimize risk only newly-opened positions and to lock in profits on profitable positions. They also serve to free up risk capital.

You can buy my new book on Stop Orders from Amazon.com, Amazon.co.uk, or the Global Investor Bookshop.

3123% in Six Months!

The spread betting portfolio that I ran as an example in my forthcoming Stop Orders book (Amazon.com and Amazon.co.uk) has now been closed out for a total return of 3123% in six months. I started the portfolio in March 2009 with only £288.02 "net equity" and in the 26th week I closed all of the remaining open positions for a final "net equity" (including my previous withdrawals) of £9226.55.

This feat was achieved through a combination of position sizing, leverage, stop orders, and pyramiding as described in the book.

In previous installments I have included a table showing the ups and downs (mainly ups) of the portfolio over time. They say that a picture paints a thousand words, so here is the portfolio appreciation in graphical form:

Building Better Pyramids

If you liked my article Pyramiding Explained you'll like the follow-up article Building Better Pyramids in which I give a concrete example of how you can lock-in profits using stop orders, and then re-invest those profits in the same (or new) positions.

You can find out more about stop orders, their use in pyramiding and other scenarios in my forthcoming book "Stop Orders" to be published by Harriman House. It's already available for pre-order on Amazon.com and Amazon.co.uk.

2600% in 23 weeks!

I've been a little quiet on this one recently. Well, what do you expect with the markets having 'corrected' after the March-to-May bull run? Normal service has now been resumed, and my example spread betting portfolio has reached another new high to show a total 2600% increase (from £300 starting equity) in only 23 weeks!

You can see the full transcript in the table below:

(Note that I have withdrawn a total of £3000 over the period, which for consistency I have added back in to the Total Net Equity figure as though it was still present but having never grown nor shrunk since withdrawal)

Don't forget that some of the techniques of using stop orders, pyramiding and leverage are documented in my forthcoming book on Stop Orders.

Day trading revealed

If you class yourself as an 'investor', or maybe even a 'frequent trader', then the world of day traders may be somewhat alien to you. Surely this is a world of professionals sitting behind banks of telephones and computer screens in corporate trading rooms?

As a matter of fact, there are legions of private day traders who operate from their home offices using a single computer with a broadband internet connection.

Read more of my Day Trading Revealed article...

Pyramiding Explained (Part 1)

While averaging down can be an effective strategy when investing in stock indices and other instruments that cannot conceivably ‘go bust’, it can be disastrous to allow all of your capital to gravitate towards stocks that are in terminal decline.

There is another way. You can average up by making a small initial investment and then committing additional funds to your profitable positions as they head north.

Read more of my article on pyramiding on the Barclays Stockbrokers "Smart Investor" web site.