Dave’s Trading Diary: Let The Stop Loss Do Its Work

This excerpt from the trading diary is for educational purposes only and is not to be interpreted as trading or investment advice. See Terms Of Use here.

So the market is starting to turn over – to fall away again. Many people will say “It’s about time”, others will moan or feel as though the market is against them.

These are the best times in the market, because we really get to see if our strategies work. We WANT tough times, because we want to be tested. When we are tested, we grow, and the more we grow, the more we win.

What that means for our trading and investing is that we should not act on impulse. Preferably we will not be watching the news either, as they are paid to sell fear or greed, an investors two worst enemies.

Your Stop Loss Is Like An Employee That Works For You

So how do we stop from acting on impulse? Simply follow our trading and investment plan, and let our Stop Loss do its work. Our stop loss and trailing stop loss are places where we get out if a trade starts to reverse. Ideally we have tested this stop loss over market data history and know that it works and works well.

Using a stop loss is like employing someone to work with you. You simply assign the place where you want to get out, and if it does, your stop loss takes action. You don’t even have to pay the stop loss for it to work with you, and a well-tested stop loss can save you money and help keep you safer in the markets.

New Buys Using Our Methodology

With the market moving down for now, there are no new buys this week. If the market moves down far enough, we might get some Short trading entries (trades for making money in a down market), but only time and the market will tell.

Current Performance

See The Trading Diary Here

As of current end of day data, the portfolio has stopped out five stocks now. The win percentage is coming back closer to the long term average of around 60%.

A few people have written in expressing concerns at a 60% win percentage. Let me assure you that this is no laughing matter – no one wins 100% of the time, and you must take your win percentage into consideration with how much you win when you win, and how much you lose when you lose.

Many of you should know that even a 30% win percentage can be profitable if you profit three times as much as you lose on average. The main thing a Win Percentage will do is affect your possible losing streak (i.e. the lower your win percentage, the higher your possible losing streak) and you should know this, keep it handy and adjust your Risk accordingly.

At any rate, average profit per trade including winners and losers is 7.17%. Some stocks are still over 15%, 20% and even 30%, but if the All Ords continues down further we may perhaps come out at break even overall. We will have to wait and see – only time and the market will tell.

Happy trending until next week!

Dave McLachlan