I’ve had a couple of bad days lately and have managed to dwindle my account balance even further. At this juncture, it makes absolute perfect sense to take a look back over my August trades (99 completed and 3 open) to see what went wrong. How many did I win, how many did I lose?
As you know, I started my trading with a clean slate at the beginning of August with a £500 trading balance. It’s important to state here that this was money I could afford to ‘lose’. In other words, I wasn’t using my mortgage money or anything like that. My wife would definitely kill me if I did that.
Before I go into how my august trades worked out for me, it’s also useful to give you a brief bit of background info so you have a much clearer idea of my trading experience.
I have been interested in the markets since at least my teens. I bought a few books back then and requested a few free annual reports but I didn’t have any money to trade. I needed a job for that but that’s another story. I always maintained my interest though and every now and then, I’d read the business pages and fantasise about which stocks I’d buy if I were loaded. I wasn’t, so I couldn’t.
Anyway, fast forward 10 years or so to 2007 (age 25!) where things began to settle down a bit. I started to dream about what I’d do when I’d paid off my mortgage and debts etc. etc. and I decided to open a fantasy trading account with Bull Bearings. The fascination with trading had always been there and now that I was putting some thought into my financial future, it was always going to come up.
In the years since I opened my fantasy trading account, I’ve managed to lose £70,000 of my £100,000 startup play money. I’ve never traded continuously actively on here and could summarise my involvement as having periods of a couple of months of activity followed by a dip in interest, only to come back and try again a few months later. It did act as sort of an education though but I guess it’s not the same when you’re not actually playing with your own money.
A couple of years pas by with no trading activity – sell a business, get married, have a baby.
In rolls 2012 and things are going pretty well at home. Professionally, I’m running my own marketing services company and I have a little bit of cash spare at the end of each month. Obviously, with interest rates being so low on savings accounts, I wanted to maximise my return wherever I could and this led me to start learning about spread betting (and investing in general).
In March, I opened an account with IG Index and deposited £50.00. In the beginning, when you first open an account with IG Index, they let you start with 10p, 20p and 50p trades.
I tried it for a month (some of my early experiments are on this site) and by the end of March, I’d placed about 100 trades and lost all of my £50.
I stepped away from it then, thinking that I couldn’t do it (or didn’t want to lose any more money), until I made the decision to try it again properly at the beginning of this month.
100 Trades In – August 2012
In August so far, I’ve placed 101 trades. 98 have been completed and there are currently 3 open.
In accordance with money management principles, I’ve kept a record of all of my trades (IG Index also let you download your trading history as a spreadsheet) and have tallied up my success rates.
Completed Trades: 99 | Wins: 44 | Losses: 54
Success Rate: 44.4%
Total Profit/Loss: -£190
These are actually great statistics for analysis that I hope will allow me to trade more profitably in September.
For example, if I risk 10% of my account balance on each trade (which I didn’t do in August) – that’s £50 out of a £500 account.
With a £500 account, assuming stops are kept on each losing trade, that’d give me a possible 10 trades at the very least.
From these statistics (obviously I’ll keep measuring these as I progress to tweak my strategy for the following month) I’d lose 5 trades and win 4 with 1 unknown. I’ll assume I lose in the unknown trade.
If I risk (and lose) £50 in each losing trade and win atleast £100 in each winning trade, at the end of the month, I should actually show a profit.
6 x £50 losing trades = £300
4 x £100 winning trades = £400
Total Account Balance at Month End: £600 (+20%)
Compounding a Possibility?
If I could maintain this kind or performance track record on a monthly basis and keep my 10% risk on each trade, I could be looking at a compounding 20% return each month. For example, £500, £600, £720, £864, £1037 etc.
Does this sound too easy? Is this too outrageous a plan?