Rip-Off Britain – Chapter 2
I feel its time again to have another moan about my gas bills. If you were reading my articles a little over a year ago you will probably remember my last rant on this subject. At the time the wholesale price of Natural Gas had been in long term decline and was actually at its lowest price for 7 years, having FALLEN by over 75%. Yet mysteriously we, the consumers, were facing bills escalating wildly out of control over these same years. I wasn’t happy about it.
If you missed that article but these astounding facts interest you, here is the link: http://simon-townshend.com/2009/05/rip-off-britain
I heard on the news a few days ago that the gas prices we consumers have witnessed more recently are due to the weakness of the Pound. So the excuse seems to have evolved rather over the last year – maybe a few people with more influence than me started taking an interest in this market that so few people ever look at?
Needless to say when you compare the price of a Dollar (the currency in which Natural Gas trades) today to its price a year ago you notice something else that’s rather intriguing…A year ago a Pound bought you 1.5 Dollars. Today it buys you errr 1.5 Dollars! In the period in between the Pound has been STRONGER, not weaker, actually maintaining 1.6 to 1.7 for the majority of that time. So that was a pretty feeble excuse then. But maybe it served its purpose and diverted unwelcome attention away from the true wholesale gas price.
What will they think of next? Actually I have a sneaking suspicion that the next excuse will in fact revert back to the “terrible rises in the wholesale gas price”. The fact that these rises , if they do in fact happen, will come from an unbelievably low base will no doubt be overlooked as the con unfolds.
Why do I think this? Well over that last few weeks the Natural Gas market has actually bottomed and is now starting a very pretty well behaved new uptrend. How far it will rise is anyone’s guess but when you see just how far it fell over recent years, a very substantial rise is by no means out of the question:
The real question on my mind is if my own gas bills were able to rise during the biggest fall in real gas prices in recent history, what the heck will happen to them now? I fear we already know the answer to that!
On a slightly more positive note – my fund members and SIR subscribers have been long this market for the last few weeks and we plan to not only hold onto the existing position but to add to it at every opportunity if this new uptrend develops as it has the potential to. So “They” may have really shafted us on the way down, but at least we are somewhat hedged against the next round of shenanigans that no doubt will start to become newsworthy over the coming months. 
I dont know about you, but I am getting more than a little bored of being treated like a mushroom by the powers that be.
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Copyright © Simon Townshend Ltd 2010, all rights reserved
Last 4 Places Now Available
May was a pretty tough month for everyone I know, with so many shocks hitting the market and causing instant reversals on what felt like an almost daily basis. It is difficult for any strategy to perform in such a wild and random environment.
We did not escape either and our swing trading strategy had its first losing month after 14 consecutive profitable months. We knew a losing month had to arrive at some time and it finally chose May! So that was our first losing month and our worst drawdown ever.
But I am pleased to say it still wasn’t a terrible drawdown. I am even more pleased that on checking my figures last night I discovered that in the first 2 weeks of June our relatively few trades (4 winners and 1 loser) have completely recovered that drawdown and taken us right back up to equity highs.
Once again this strategy has proven just how powerful it is and I have decided to make available 4 new places for serious traders who are interested in joining myself and my small group of friends who take these trades with me. Ideally I would like to take on 2 new members this month and 2 in July, as I work closely with each person until they are fully conversant with what we do and how we do it.
Before casting the net wider I would first like to offer these last 4 places to the readers of my newsletters. So if you would be interested in adding something extra to your current trading activities please have a look at the following website and drop me a line to let me know you are interested:
www.SeriousInvestmentReturns.com
This is a swing trading strategy with typically 6 to 12 trades per month and you need to be able to risk $1,000 – $1,500 on a trade as the majority of our trades have this sort of initial risk. There are some trades with initial risk of just $600 to $800 and also a few in the more volatile markets requiring a larger risk per trade (which I advise members to skip until they have built up a decent profit). Here is the cumulative profit and loss chart for our 152 trades from the day we started (in March 2009), right up to last night:
If you are interested to hear how I came to develop this strategy, or for that matter what you need to do to develop your own, then here is a recording of an interview last year that you may find interesting:
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Copyright © Simon Townshend Ltd 2010, all rights reserved
Managing through adversity
I have the pleasure of having met hundreds of traders, the majority of whom are full time professionals. I have regular dialog with several dozen traders as well. Guess how many have been telling me lately that they are having a great year?
Zero! Not one single person has said to me “hey Simon I am doing well at the moment”. Isn’t that strange out of all of these traders? I have had people say to me:
- “The market just doesn’t move, so I cant make money” – true earlier this year there was no opportunity whatsoever, at least none with a worthwhile risk/reward profile.
- “The markets are moving randomly on news and manipulation, so my normal signals aren’t working” – also true nothing works when a sudden shock spontaneously rewrites the supply/demand dynamic.
- “My strategy is broken, I need to throw it away and start building a new one” – wrong, don’t do it! Living through freak times does call for modified daily behaviour, but don’t discard the tools that have served you well over many years throughout normal times.
Several people have asked me what I am doing to survive until things settle down to a higher degree of normality, so here are the three things at the top of my list:
Protect your capital
The first and absolute top priority is to protect the bulk of your capital. How this is best achieved may vary from person to person, but whatever you do you must ensure you emerge from the rough times with your capital largely intact. It is pointless waiting for better times when you can be profitable once again if you are effectively blown out of the game or nursing a drawdown that is too big to be quickly recovered from when the time is right.
Keep trading
The second point is that you must keep going. That may sound at odds with the previous point. But if you cut back on the number of trades you take and the size of those trades, you can actually continue indefinitely without doing any significant damage to your capital. If necessary move onto a simulator or just paper trade. But you must keep trading, for several reasons – it keeps you in touch with the market, it keeps you active and alert, it helps you practise and hone your execution skills. Most of all it means you will be there when the silliness subsides.
That doesn’t mean you need to keep up the same long hours or to trade every day of the month. Let’s face it you are not going to make money working 60 hours a week, working half time means you are simply going to not make money half as much – if you see what I mean! There is nothing wrong with taking time off as long as you keep trading sufficiently long each week to still be in the game. After all you wouldn’t want to be taking time off when things improve, so why not make the most of the tough times?
I used to think the solution to tough times was to put more time and effort in. It was a natural way to think for those of us brought up to work harder and harder until we succeed. But I was wrong! If the market isn’t going to pay you it isn’t going to pay you and that’s all there is to know.
Do something positive
My third priority is finding something constructive to do in the business that keeps you positive. Work on something that is within your control and not that of a crazy market. It doesn’t really matter what you choose as long as you do something that is of value and something that you can feel a sense of achievement over.
I recently applied myself to taking overhead costs out of the business. Fixed costs are a drag on any business and trading is no exception although mercifully our fixed costs are more limited that most businesses. I was pleased to find savings amounting to 18% of our annual spend that I was able to eliminate. That is quite a few thousand dollars a year. But it is not the money that matters so much, although clearly it is better to have it than not. What really matters is applying yourself to doing something constructive that you can feel proud of achieving at the end of the exercise. It is certainly no replacement for getting your trading back into a profitable groove, but it is something that you have absolute control over and that no crazy market can derail you from.
So that’s my simple formula to weather the storm – protect your capital, keep trading and find something positive to do.
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Copyright © Simon Townshend Ltd 2010, all rights reserved
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