Because I last posted in mid-September, this one might be better titled “Trade of the Month”.
At the very end of September, shares in embattled pawnbroker Albemarle & Bond fell off a cliff, so I bought some at the ‘bargain’ price of 71p-per-share on the basis that I would make a killing (if they regained their former glory) or would not lose too much (if they didn’t, because I had a modest exploratory position size). A few days later, the price halved again from 71p-per-share to 36p-per-share, so I bought some more.
You shouldn’t do this kind of “averaging down”, right? Because it’s a sure route to the poor house. Well, only if the averaged-down stock becomes a magnet for all your funds, and not if you keep a manageable position size as part of a diversified portfolio.
In this case it paid off (so far) because the share price is around my “average” buying price of 53p-per-share; as illustrated in the following chart. Note the horizontal black and grey lines labelled BUY, BUY and AVG.
In this regular stockbroker (not spread betting) account I employed no stop orders because I was willing to lose the whole of my ‘massive’ £2000 investment in any event. But as the combined position moves into profit, I will consider a stop order to stop such profit from slipping away.
Yes, I have some spread bet positions too, which I established at the lower price, one of which is indicated by the horizontal blue line at the bottom of the chart. Now guaranteed to exit at a profit thanks to the guaranteed stop order indicated by the faint horizontal dashed red line.
As a bonus, I also took a punt on A&B’s mutually-embattled peer, the listed pawnbroker H&T. Now also safely in profit.
Two Steps to Better Spread Betting:
1) Buy the Better Spread Betting Book
2) Sign up with Capital Spreads, IG, ETX Capital, or Spread Co
Disclaimer: this posting is for general education only; it is not trading advice.