Highs and Lows

Sorry for the lack of posting I have had to take a break due to being really busy and dog tired not a good combination. It is a good job that other than keeping an eye on the stop loss position the shares look after themselves but I do need to finish some further research and buy some more.

So how have they done? I am currently £35.12 in profit but it has not been a level line the spread of profit and loss since I last posted has been about £100 veering from almost £30 loss to over £70 profit so it is good that I regard this as a medium term (at least) investment or else the pressure of when to sell/hold would have been difficult to manage.

This is one of the reasons I need to buy more shares to spread the risk so that overall profits are more consistent or at least that is the aim.

Just been and bought this week's copy of Investors Chronicle and I need to follow up some shares that I am watching and then decide which ones to buy.

Virtual Reality

Following the comments from Tempewytch it made me think about the psychology of what I am doing at the moment - the trial period. There is a terrible temptation to wish that whilst things are going well that I was using real money - but of course when fortune reverses as it is bound to do I will be relieved that it's just monopoly money (although I am very competitive when playing monopoly :) ) The roller coaster of emotions is very interesting - I am glad to say that the temptation to keep checking the share prices is lessening. With the first share doing well so far it has made it even harder to choose the next trade as I don't want to spoil what I have already achieved and of course my ongoing profit will immediately be reduced the moment I purchase another share due to the costs, spread etc. but hopefully I will be able to find the right share soon as I am not going to make profits on cash left in my account.

The profit to date is £59.28 very pleased with that well ahead of my target so far.

Patience Rewarded

Well I may have very little patience but today it has been rewarded in that my loss has been transformed into a profit of £31.92 the shares having gone up 16p today so very pleased with that hoping that this is the start of a nice little rise. Still researching  and watching other shares but no more purchase decisions made as yet.

Blue Monday

Today is supposed to be the worst Monday of the year not sure why (perhaps the arrival of the Christmas Credit Card bills) it has been OK as far as I am concerned.

I did not post over the weekend as I have not been well but I probably will not post at the weekends anyway as the markets are closed, unless something dramatic happens.

Much uncertainty about the Euro again with some very mixed messages depending on who you listen to, just reflecting the fact that nobody really knows how it is going to pan out I am sure 2012 will be a very volatile year.

As for my shares they have finished exactly the same as the close on Friday so the loss is still £29.52 patience will be required :)

Investors Chronicle

I have carried on researching today and actually managed to read the Investors Chronicle all the way through usually it takes me all week to find the time.

I have also started my trading journal which should be interesting to look back on.

As for the shares well things have not gone quite as well today it was never going too be a straight line going up so at the moment I have a loss of £29.52 the shares themselves have gone down a couple of pence but of course it is those dreaded trading costs - its a good job I am not planning to be a day trader - anyway we shall see what next week holds.

My First Trading Day

I am really glad that I have bought my first shares it feels like quite a big step even if it is only a paper transaction. The psychology of trading is really important and I can see that I am going to be doing a lot of self analysis as this process continues.

How did my first day go?

Did I compulsively check the price of my shares? - of course I did

And the result at the end of the day - I have lost 8p - I am pleased with that to cover my costs on the first day is more than enough for me 

I have added three more shares to my watch list none of them are immediate buys but I will be following them to see whether that alters

And tomorrow?

Well that is another day..................

I did it

I have bought my first shares 400 shares at 440.66 which makes a total of £1762.64 plus stamp duty £8.81 and Commission of £11.95 making a grand total of £1783.40.

For those that want to know how this is done all you have to do in real life (although this of course is my fantasy trading account) is open an online trading account with your company of your choice deposit the amount you have decided to invest using your debit card and in my case make sure that you open a stocks and shares ISA account so that you don't have to pay tax. You will probably be asked for ID to make sure you are who you say you are and once the account is open you are ready to go.

You then type in the code for your particular share if you don't know it (but you should if you have researched properly) then you can search for it and a buy/sell button comes up click the buy button it will give you a price put in the number of shares or the amount you want to spend and you then have 15 seconds to press the button to confirm that you want to buy at that price and that is it. Money gets deducted from your account plus commission and 0.5% stamp duty and correspondingly the shares will become part of your portfolio. It's all scaringly simple.

The only problem with the fantasy account it doesn't seem to give you an option to set a stop loss when you buy so I will have to set an alert should the share fall to my stop loss price but in real life you can ask for the shares to be sold as soon as they hit this price.

I have however set my stop loss price which is 394 which gives me a risk of 46p per share making a total of £184 plus my stamp duty of £8.81(only on purchase) and my buy/sell commission of £23.90 which makes £216.71 which is slightly over my 2% target of £200 but in real life I would not expect commission to be so high and I wanted to keep a round number of shares.

Of course because there is a difference between the price you can buy shares at and the price you can sell shares at (the spread) and you always have to buy at the higher price and sell at the lower price and because of the stamp duty and commission you are a loss making position as soon as you buy shares until hopefully they start to rise.

As I write the price has risen to 443 and my current loss is £11.24

Could this be my first trade?

My research has found a share that matches all my criteria which is really quite exciting. I am going to keep an eye on it and it could very well be my first buy. I have decided not to reveal the name of the share I am trading until I sell the share and then I will reveal all. This is to stop well meaning advice which might sway my judgment on how I trade the share. I will reveal enough details to make it interesting for readers but not the name until my trade finishes unless it turns out to be a long term keeper and then I will probably reveal the name but that will be some months away. So watch this space I could be trading soon.

The King and I

I know I am only just posting by the skin of my teeth today due to taking my Mom to see the King and I, our Christmas present to her. I did think of the Asian markets briefly but I still need to learn a lot more about UK markets before I venture further afield. I did pick up a couple of ideas for companies to research today but otherwise it was a need to do better kind of day.

Dongle Trouble

As I suspected my dongle didn't work I have realised it is probably because I don't top it up very often so it has probably been deactivated - so that is something I need to sort for next time. 

I did however continue with my research including listening carefully to the radio during the journey for any stories that might flag up a company worth taking a look at. I also caught up with reading the Investors Chronicle (not whilst driving obviously). The journey was also a good time to have a big think about what I am trying to do and what I hope to achieve. I have a list of companies I have noted over the last few weeks so I will now start to see if any of them pass my criteria tests and see if there are any shares I might be interested in investing in. It will be good to make a first trade but the research needs to be done first - only fools rush in.

My Trading Plan

OK this is it at long last My Trading Plan I shall be testing this plan over the next few months of paper trading before I commence proper trading in November

MY TRADING PLAN

My Objective

In September 2016 my youngest children will be entering secondary school and I need to be in a position to either move or pay school fees. In order to achieve this I need to clear as much of my mortgage as possible by then. The repayment part of my mortgage is due to be repaid by April 2018 and my current strategy of slight overpayment and offsetting should ensure that this part of the mortgage is repaid by September 2016. The remainder £190K is interest only and it is this part I want to repay through trading. The plan is to fully invest the Stocks and Shares ISA allowance each year. This part of the mortgage needs to be fully repaid by April 2023 either by the present repayment vehicle the sale of our second property or preferably from the proceeds of trading.

My Strategy
I plan to start my trading with a cash sum of £10,660 in November 2012 after a period of paper trading with an account of £10000. I propose to trade in shares in the UK share market whilst I learn the basics of trading. I will use technical analysis to identify shares to trade and to confirm my research on shares.

Share Selection

I will select my shares based on the following criteria

1. Shares must always be researched before being traded

2. The maximum share price spread I will trade is 4%

3. The Exchange Market Size must be at least £2000 preferably £5000

4. Shares can be from any sector

5. I will trade shares with a market cap of between 50million and 900million

6. I will not trade a share where the net debt is more than 3 times the full year pre tax profit or likely pre tax

    profit, except oil, mining and property shares.

7 I will not trade a share where the market cap exceeds 15 times profits

Trading Rules

I will only have four trading rules which will be as follows :

1. Every trade that I open will have a stop loss in place

2. I will always place the stop loss at the same time as my trade

3. I will only move my stop loss in the direction of my trade.

4. No trades to be made in the first or last 30 minutes of trading

Money Management

My money management rules will be dictated by the following rules.

1. The maximum risk per trade to be 2% of capital including commission and expenses

2. The maximum risk at any one time to be 6% of capital

3. Trade size to be set by risk size and stop loss position

4. I will cease trading for the rest of the month in any month where my total realised risk in that month reaches 6% and close all open risk trades

5. The amount of capital will be calculated at the end of each month and the risk adjusted accordingly for the next month

6. No trades will be open and closed in the same day

7. Income from dividends to be reinvested in trading capital

Trading Target

A minimum increase of 8.5% in trading capital in the first 12 months after deducting commission and expenses.

Trading Records

1. A trading diary to be kept every day

2. A manual record of each trade to be kept including the following:

           Share

           Date bought and sold

           Quantity bought or sold

           Price bought or sold

           Position of stop loss

           Profit or loss on the trade

           Cost of the trade

3. A daily balance of the overall account position, including cash in the account and open positions value

4. A weekly summary of the total capital at risk

5. A monthly P/L summary of closed positions

That's all folks

Sharks and Piranhas

Continuing the animal theme (despite failing to catch the dead bouncing cat)or in this case fish I have been studying the three Ms of Trading Mind, Method and Money. Mind being the psychology of trading, method how you trade and Money being the management of your money. Today I have been concentrating on the Money which I consider the most important after all the reason to do this is to make money (even if it is the most exciting thing to do with your clothes on!) and you can't make money if you don't have any money to trade with so if you lose all your initial investment, unless you have deep pockets (which I don't) you are sunk.

To save yourself from the sharks you should only risk a maximum of 2% of your total capital on any one trade preferably less because of commission, stamp duty and other costs so if my investment is £10,000 I should only risk £200 that doesn't mean I can only buy shares up to the value of £200 in any one share because with the expenses I would never make any money BUT when I buy a share I must also set a selling price known as Stop Loss and if the shares hit the Stop Loss they will be sold and I will have limited my losses and it is the margin between my buy price and my stop loss which is my risk and which in this case must not be more than £200.

To save yourself from piranhas in any one month your risk at any one time must not be more than 6%. Stop Losses can only be moved in the direction of a trade and so if you are trading shares to go up the stop loss can be put up as the share price rises and once your stop loss goes over your buy price your risk is gone and therefore you can place that risk on other trades but can never be put down. If your stop losses are activated and you lose 6% in any one month then you must stop trading that month and close any open risk trades.

The 2% and 6% are calculated once a month on the total value of all open trades or cash in your account and so if you are doing well the amount of money you can risk will go up but if you are doing badly it will go down and the 6% rule stops a losing streak and makes you re evaluate what you are doing.

This will take a lot of discipline because if you are at your 6% limit then you can't open any more trades until your risk decreases however tempting a particular share might seem - but it will save you from losing your shirt.

Lots to think about.

Fool or Hound take your pick

Today has been interesting I have been learning about the Greater Fool Theory where a person trades in such a way that they hope that there are greater fools than themselves in the market - not a good idea the market soon spits out fools unless they have limitless pockets.

In contrast I have also been learning about a Hound of the Baskervilles signal when something you expect to happen doesn't as in Sherlock Holmes' case when the dog should have barked but didn't thereby revealing that it was an inside job -when this signal occurs you should immediately trade the opposite of what you were doing which normally is not recommended jumping ship is normally a recipe for disaster - although recognising such a signal is not something I could do at the moment 

So to begin with I will definitely try to avoid the Greater Fool Theory and will not be seeking out the Hound signal either

Back to studying I think .................

It has been a busy day but have managed to squeeze in a partial reread of Come into my Trading Room by Alexander Elder which I thoroughly recommend. Thank goodness for my new kindle as it has been very much a read on the run type of day :) So that is my challenge to finish reading that and complete my Trading Plan and then start researching actual shares.

Trading is the most exciting activity that a person can do with their clothes on. - Alexander Elder

The trouble is of course that is not a good state to be in if you want to make rational decisions, hence the need for a Trading Plan. Then you can make the decisions in advance in a logical unemotional way and implement them as and when necessary even in the heat of a volatile market. I have been working on my Trading Plan for the last week or so and will publish it soon. I am not saying that it will be the final plan but it will be a plan that I will be able to test whilst paper trading and tweak as necessary.

Introduction

Welcome to my blog. Why Zenith Trader? Well this is the year I have decided to become a trader in stocks and shares and like any other trader I want to reach for the highest point. I am a total novice so don't expect any complicated language but you are welcome to join me in my journey of discovery. I am going to start with paper trading to try out my plan and see if I am likely to make any money with the objective of trading for real in November. Why November? That's when I expect to have enough money to fill a stocks and shares ISA for the year as I intend all my trading to be inside an ISA for the tax advantages.