Trade of The Week: Supreme Skill vs. Lady Bad-Luck on Lonmin

I’m all for warts ‘n’ all coverage of spread betting and of trading in general, so my “trades of the week” features won’t always be winning trades. In that spirit, today’s examples is a good one.

When the Lonmin share price “gapped up” on news that the Marikana miners had returned to work, I thought it would be a good time to go long. But I’m not stupid, and so I waited for a significant pull-back to close much of the gap rather than buying at the gapped-up price. In doing so, I saved myself from a 50-point post-gap price fall.

So far, so good. I bought at 665.4 rather than at the higher gapped-up price of ~715, and put my trusty Capital Spreads guaranteed stop order in place at 632.7… where it subsequently stopped-out for a loss of 32.7 points. So far my Supreme Skill has saved me 50 points, and sheer bad luck has cost me 32.7 points.

According to my Position Trading philosophy, I have a policy of not buying back unless I can do so at a lower price than my last selling price, so I didn’t buy back (out of “revenge”) until I could do so at a lower price of 624.9 thereby saving myself 7.8 points. So now my Supreme Skill has saved me a total of 57.8 points, but the ever-falling price means that Lady Bad-Luck could yet cost me another 25.9 points-to-stop, costing me a total of 58.6 points.

So I’d say that Supreme Skill and Lady Bad-Luck are pretty much “neck and neck” at this point, except that I’m already £32.70 poorer on my £1-per-point position and could end up almost £60 poorer with nothing at all to show for it. Which at least is better than the poor blighter who bought at the gapped-up price and held all the way down.

I realise it’s difficult to visualise what I just said, so here is a nice picture. Green represents avoided losses due to Supreme Skill, and red represents actual or potential losses due to Lady Bad-Luck.

Trading Lonmin

Subscribe to Better Spread Betting by Email (I won’t tell anyone else, and you can cancel anytime)
Disclaimer: this posting is for general education only; it is not trading advice.