DIY Investor Magazine
/
March 2017
48
IN THE SWING: TRADING BLOWS WITH
DIY INVESTOR’S VERY OWN HUMBUG
DIY -
First of all I’ve got to ask, why do you guys call
yourselves Humbug and Fagin?
Humbug -
‘It was the marketing director of DIY who
dreamt up the name Humbug, maybe because among
other things I own a famous sweetshop, maybe because
I’m a happy little soul and maybe because my views on
most things are slightly to the right of Vlad the Impaler!
Fagin is because Simon likes picking the market’s
pockets’.
DIY -
You changed from trading and investing the Small
Caps to Swing Trading the FTSE 350, Indices and Gold
five months ago, are you pleased with the decision?
H -
‘Yes without question, we were both investing
in Small Caps, the results were sometimes good,
sometimes not so good, but then Brexit made it all but
impossible to know how to value companies going
forward, hence the change. The current DIY Investor
Portfolio was opened with £100k in late September
2016, by the end of February 2017 it was up almost
£4200.’
DIY -
How do you know what to trade and perhaps more
to the point when to trade?
H -
‘We trade mainly to the long side and whilst we do
keep an eye on any relevant fundamental factors we
base almost all our decisions on price action using
charts. It’s essential when swing trading to keep costs to
a minimum as profits are relatively small in percentage
terms, it’s also essential to only trade the most liquid
instruments, we need to be able to enter or exit in a
moment without disrupting the price of what we’re
trading.’
DIY -
What’s the theory behind what you do?
H -
‘It’s very simple, as Benjamin Graham (the man who
taught Warren Buffett) said those many years ago, Mr
Market is either a wild optimist or a manic depressive.
We look to see when a price of something has fallen too
Humbug has been writing the Diary of a DIY Investor since 2014. In late September 2016 he
changed strategy in the light of the Brexit vote and went swing trading with a six figure sum,
using a system that he and his trading partner Fagin had developed that summer.
far in the short to medium term and looks to be turning
round and gathering upward momentum, buying in at
that point and selling out when it either reaches a profit
target or clearly loses that upward momentum.’
DIY -
What size trades do you place?
H -
‘They vary, but generally around £20k a time.’
DIY -
Surely this is a very dangerous strategy, betting
such a high percentage of the portfolio on an individual
share?
H -
‘You would think so at first glance I agree, but when
you drill down into our thinking you’ll see otherwise.
Believe it or not within the limits of being traders we’re
very risk averse. Whilst things can always come out of
nowhere to cause huge problems, we only trade the
better companies in the FTSE 350, for example we
avoid like the plague any with debt issues or recent bad
reports and we are ruthless at exercising stop losses, if
something is going wrong we get out without a second
thought. We bet for sure, but we don’t punt and there’s a
big difference.’
DIY -
Finally, where do you see the market going this
year and what kind of results are you hoping to achieve?
H -
‘To be honest we’ve no idea where the markets are
going to go and frankly we don’t care. If they go up we
hope to ride the wave, if they go down we either stand
aside or go short while they decline and then buy back
in when they stabilize. Market direction is not important
to Swing Trading as we practise it. Sure, that sounds
glib, but provided we keep all emotion out of how we
trade, we can cope with both Bull and Bear Markets;
what we’d like to achieve is a good double figure
percentage return without too many big drawdowns
along the way’.
WE BET FOR SURE, BUT WE DON’T PUNT AND THERE’S
A BIG DIFFERENCE.
