Wednesday, September 7, 2011

Trade update DIG

The oil price dropped suddenly on Thursday to a loss of around 4%. Whenever oil suffers a sudden drop I look to trade a bounce back. On Thursday I bought DIG at 41.59 happy in the knowledge that not only was there a 4% drop that was likely to bounce back, but also that US oil facilities were being shutdown ahead of several approaching storms.

The next day oil fell almost another 4%.

Normally I would have doubled into an oil trade at this point, but at the moment I have two much capital committed between the XIV, DIG and DAX Trades. I held the original position and have just closed it this evening for a profit of 207 USD after costs.

Oil continues to be a dependable trade, I look forward to closing the next level of the XIV trade in order to free the capital for future double down opportunities in oil. A double down on Friday would have netted closer to 800 dollars.

This trade provides an interesting demonstration of 'compounded loses'. Oil is now back to or even slightly above its closing price on Wednesday, however DIG is still a long way short of a full recovery. I have saved the 5 Day chart for DIG and will use it in a future page explaining compounded loses in the 'Why is it so difficult to make money trading' section. In the meantime I am happy enough with the 207 USD profit.

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