Robbie Burns
Robbie Burns's columns :
30/01/2017How I Played the Santa Rally This Year >>
06/12/2016Take a Punt on the Santa Rally
03/10/2016Flotations Worth a Punt

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Robbie Burns – The Naked Trader

Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at www.nakedtrader.co.uk.


How I Played the Santa Rally This Year

30/01/2017

How I Played the Santa Rally This Year

Seems odd taking about Santa Claus in February. Still, going to do it anyway.

The Santa Claus rally this year kept going well into January.

I always write about the Santa Claus rally in the market and how I intend to play them so thought it might be interesting to write about how it all ended up for me.

My intention was to buy as usual mid-December and sell at the end of the month to make around 300 points. Then I actually thought I might switch to a short in January, a strategy that can work well historically. But while it is good sense to have a trade plan it's also sensible to change it after a while should it be obviously a good idea.

So I started off buying the FTSE as usual. I used a stop a long way off - over 150 points. I bought in small tranches as it lifted and dipped. History was on my side - last three years it has risen 300-400 points in the last ten trading days.

There is no point having a stop at say 30 or 40 points on the FTSE - you will almost definitely be stopped out. Indeed one of my readers mailed me. He tried to play the rally with stops of 30 points and lost. This stop is way too tight.

I look on it as a bit of a gamble and prepared to say lose £1,500 on a £10 a point bet if it goes wrong.

The beauty of the FTSE Xmas bet if it goes right is that once your profit is over 150 points you can move your stop to break even. And keep moving it up to about 150 points away.

I bought in several tranches between 6750 and 6950 using 150 stops each time at the different prices. Apart from one 60-70 points dip it pretty much kept rising. Once the FTSE hit 7100 all the stops were into at least break even, some into profit. I now knew I pretty much couldn't lose, indeed it was just a question of how much the winnings would be.

There's not really any need even for a guaranteed stop though you could have one. The FTSE trades 24 hours so unlike a share which could get hit by a profits warning overnight and open up well down at market open this won't happen with the FTSE.

Well, there is an outside chance say if there was a major political event on a bank hol or on a Saturday. It's pretty unlikely. But a guaranteed stop would make it certain I guess.

I couldn't quite resist selling half of the Santa rally bet near year end as it sailed higher. But it was obvious once it hit over its all-time high and continued to push up there was more to come, so the bets went back on.

Once the FTSE hit 7300 I was really sitting pretty. Stops now around the 7150 area. With the FTSE pushing up more than 7300 it now seemed sensible to tighten stops to 100-120 points up to the 7200 ish area So how did it work out in the end? My stops were all hit and I took an overall profit of around £20,000. If I had got out at the top profits would have been around £25,000. But I am perfectly happy with the results which were much better than I expected. The profits nicely paid for a lovely holiday in Dubai and a stay in a castle in Ireland - and plenty of spending money too. Personally, I can't wait for December!


You can read Robbie’s daily market comments together with his latest buys and sells at his website www.nakedtrader.co.uk

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