rather than pick out individual stocks to trade, it can often be worthwhile to trade the indices themselves, especially in times of high volatility.

for those so inclined, i attach below charts for FTSE and FTSE 250, though one might equally be tempted to trade Dow or S&P, which is significantly broader in its coverage, or even NASDAQ

for ease of reading, i have attached 1 year and 3 month charts in each instance

Good piece here and sounds familiar especially after back testing my trading last weekend (for the past 6 week) where I found that although I had made a nice return if I had held longer (although I would have stopped out on 5 stocks) my return would have been to the tune of 32% better.

Try the exercise yourself, its certainly an eye opener but I guess these markets have made most very cautious.

heres the article....

Premature small-capitulation problem for investors
By Rob Mackinlay 1/04/2010 Investigate.

When the market rises investors are likely to sell too early but they could also be deterred from buying shares that have risen by small amounts, believing they have missed the boat according to Investec.


This charge could yet be levelled at Akuman, Investegates beleaguered investment club, which has sold all its shares in AIM-quoted Uranium Resources today for 1.97p each. The sale falls just short of recouping the original investment despite the stock gaining 88 per cent yesterday.

Philip Rodrigs, manager of the Investec UK Smaller Companies also believes that this theory could apply to investors in small cap funds: The herd ignores small caps advice may not help

He gives two examples that seem to confirm his view. The first is Smiths News which, along with Menzies, benefited from the downfall of Dawson Holdings last week.

At the time small cap managers looked like the losers with three funds holding Dawson in their top ten holdings but none holding Menzies or Smiths News, despite these companies being significantly larger (Investegate covered the story: Small Cap snapshot: Dawson and fund managers lose in news distribution battle)

Rodrigs said that he bought Smiths News when its shares had already increased by 14 per cent. For many investors the first bit of good news; that Smiths News had won some of Dawsons lost contracts, would have been the end of the story. For those holding the shares it would have looked like a time to sell, while those considering buying believed they had missed their chance.

Rodrigs said: The first bit of good news presaged further good news and created a kind of virtuous circle. I bought at about 50p, they are now trading at 84p (83.25p on 1 April)."

He also said that he held shares in AIM-quoted oil and gas exploration firm Afren, which saw its share price rise by 220 per cent between 16 and 30 March from 13.75p to 44.25p. Its shares now stand at 36.37.

According to Financial Express data, none of the 56,000 funds covered in its database hold either Afren or Smiths News in their top ten holdings.

Are managers missing the rally?


To comment on this article please contact :
rob.mackinlay@financialexpress.net
Tel. 020 7408 8074

Good article GF. Problem is it goes against human instinct. If I was given a penny for every time I didn't sell into a rally and then got burnt as my profit disappeared into a loss I would be very rich. Conversley, I now bank my profits although most of the time I bank too early. I find trying to judge it is impossible so it is a case of the better of two evils. Thus, I'm happy to have my profit even if eventually I could have made more.

Good point DD, but when you do a back testing exercise like I did, it does leave you a bit deflated.

Its all about getting a happy medium I guess.

The first bit of good news presaged further good news and created a kind of virtuous circle. ...... that much is very true, but to comment with hindsight that one could have made more by hanging on, is merely the flip-side of the foolish who bemoan that they should have banked the profit when it was available.

at least today, i have followed my own instinct and banked several profitable positions, including one in WOS, which i only bought this morning, and now 2/3 of FTSE long ..... as i mentioned elsewhere (SRV?), i think the markets are starting to look frothy, so fully expect to be able to buy WOS back cheaper than at which i sold ..... and if not, so what?

Good comment Cynic ......

Regards
Amar

The other point is that there are so many changes of direction in shares atm that it would be impossible to buy at the bottom and sell at the top.

If you can make a profit no matter what it is, in my opinion you're doing bloody well! FWIW, over the past 2 weeks I've managed to bank a good profit on TAN;CBM;XTA;CFM and ANTO. Somehow AFR escaped me!

I think the G20 statement comes out at 1500 hours could be very volatile possibility of buy rumour sell news,got well and truly trounced overnight, very silly!

almost guaranteed to be the usual load of pre-written hot air ....... you need to revisit the relevant episode of "Yes Prime Minister"!

crazy times ..... not a day to be away from the screen playing golf, even if it is warm and sunny!

now gone long Dow and bought back into WOS ...... more than happy to have missed greater profits, but made enough

shall watch with a view to shorting Dow and/or FTSE o'night as surely a rise of the current magnitude cannot be sustained much longer without a correction ..... shall be off screen for a while, so closed out profit on both Dow and FTSE

Getting it all wrong again.

Buy it drops. Sell it rises :O(

Keaydian ................

We all have a day like that sometimes ..........

Cheer up ............. move on ............. you will come up trumps .........

Regards
Amar

Thanks Amar.

Can't make up my mind as to the likelihood of a friday afternoon selloff, or not. DOW futures currently -48 & some UK stocks getting trimmed back this morning. Have sold quite a few profitable stocks over the last day & now looking to get back in after a lurch down, which doesn't seem to be happening yet!
Are you short DOW yet Cynic, or anyone, or too risky?

H, don't forget it's Non-Farm Payroll numbers day in the US today, usually has an affect... but please don't ask me which way -):

good morning Harry ...... i opened a Dow short very late yesterday evening; contemplated holding it o'night but took the prudent course and modest profit 20 minutes later.

my gut feeling is that the markets will be down tonight as the heady rises and poilticos hot air are all digested

Nikkei and HK were ones to short last night, did the former in a small way with a limit which went well unlike the night before when it proved highly destructive! Everything looking bullish so far today with dollar weakening,oil rising.Sure this is a temporary rally rather than the real thing and they have a habit of going well beyond all expectations .Quite a bit of resistance at 8250 on Dow from chart if it gets that far or 860 s@p. Shall put sell orders in there

Thanks all. Having got back from walking the dog, DOW futures are now showing -4 points, so as I have said before, looking at futures figures too early isn't always much of a guide.
Maybe it will be the non-farm payroll & the jobless figures which will turn the market. Failing that, Bernanke is addressing the nation later in the day! Lets hope the feelgood factor persists.

663k 3 less than expected,what now?

think they were actually much as expected, and certainly Dow is now indicating +81 ...... i'm off to my excellent fishmonger and shall consider further on my return ..... common sense prob says do nowt, and my gut feel is still that NY (and maybe London) will finish red