August 31st

A damn fine end to a damn fine month. I began August just teetering above €20,000, or barely above breakeven for the year. Four weeks later and I'm on the verge of breaking through €23,000 and year-to-date returns are solidly in double figures. Considering that the market just chopped around in that time, going up and down and ultimately nowhere - well, I'm not complaining. Funny thing is, there have been many months when I've traded much, much better. I was short as the market topped in May and getting long close to the market bottom in July. Lady Luck was against old Monkey on those occasions, which didn't yield half the gains they might have. In August, though, I've made my fair share of mistakes. The month began with a one-week gain of over €1500 - very nice but as I wrote at the time, "Lord only knows how good it would have been if I'd traded properly earlier on in the week, when I left a pot of money on the table." Fast forward to last week's column, describing how "boredom saw this silly monkey force a trade...a lethargic 'let's give it a shot' type of trade…Dumb." What can I say? Sometimes being dumb can be profitable. To recap, I went long the Dow last week, betting €4 per point at an average price of 11,390. It was a bad, forced entry - I should have waited for the Dow to trade near the bottom of its recent trading range. Even a bad entry can be redeemed through proper trade management, however. My stop loss order was perfectly placed, just about keeping me in the trade. I was tempted to get out when I got back to breakeven but elected to raise my stop upwards instead. The position moved nicely into profit on one fine day last week - instead of selling out, I held on, all the time protecting my profits by raising my stop to under key technical levels. Eventually, I was stopped out of half of my position at 11,540. The trade was closed near the closing bell as the Dow hit 11,620. Ordinarily, I might have kept a portion of the position open but I didn't have much faith in the market sustaining the up-move. Besides, I'd seen a quick €1200 turnaround in my fortunes and was dying to exit a poorly conceived trade. No new trades since. The Dow is moving about but it's refused to get near the bottom or the top of its trading range over the last few weeks. My long bet had worked out but that didn't change the fact that I shouldn't have entered in the first place and I wasn't going to make the same mistake again. Wait for a good entry - newbies and thrill-seekers go looking for action whereas they should wait for the action to come to them. I've been playing a waiting game with Anglo-Irish and IL&P also - I'm hoping to get short near the top of their recent trading ranges (in both cases, around €6.50-€7). As for the markets, there's not a whole lot to say. "I can't take it anymore — this week is like watching paint dry," as Trader Mike (tradermike.net) aptly put it. It's been choppy, with neither bulls nor bears showing any conviction. Buy weakness, sell strength is what's working at the moment. Trading volumes are thin, although that should change in September. My guess is that any upside move won't be sustained and that there's more money to be made on the short side - the fundamentals look too awful for any rally to be anything other than another bear market bounce. Mind you, most of my gains this year have been made by getting long - ironic, considering I've been preaching (correctly) the bear case for most of 2008. As for my own trading, I'm up 14% since January - way better than the market if nowhere near where I'd like to be. Still, the momentum is with the monkey man and I'm looking forward to hitting 25% in the coming weeks. It's been a tricky year but I'm still betting on gains of at least 50% by year's end. Anything less and I'll be crying into my Guinness this Christmas.

Weekly profit/loss: +€916 Overall balance: €22,818

Comments

[NoTipsHere]

Hi MarketMonkey,

Well done on getting some profits this week. Maybe a 'dumb' trade, but it worked in the end. Isnt that what a 'monkey' is supposed to do anyway?

> at least 50% by year's end. Anything less and I'll be crying into my Guinness this Christmas.

50% is a hard target to reach, so I would not be crying in my pint if I were you if you failed to reach that. After a gain, it can be easy to fall into a trap of thinking we could easily be getting big gains every week.

I would advise caution .... and a gain of 20% (4k profit) on a 20k float is more than an acceptable target.

Continuing wishes ....

NoTipsHere

[Market Monkey]

Ta for comments NoTips,
There was a touch of exaggeration in that image of crying into the pint although I would like to get up to that level. I'm not expecting to make nice gains every week - preserving your capital for most of the month and securing a windfall when the occasional big opportunity comes along is the most realistic way of growing an account. As it stands, the odds are against me making such gains, we'll see in the coming months I suppose.
Regards,
MM