Summary of Trading Activity
Period Covered: January 14-16, 2025
Principal Portfolio Value: Php 15,000.00
Current Portfolio Value (Equity): Php 14,749.54
Realized Gain/Loss: Php -250.46
Number of Transactions: 12
The past three trading days provided valuable insights into how transaction costs and tactical trading decisions impact overall performance. Despite adhering to a structured trading plan, the effects of frequent re-entries and high trading costs eroded our capital efficiency. Below, we analyze these implications and outline recommendations for refining our approach.
Annotated 5-minute chart of URC on January 16, 2025, highlighting tactical re-entries, exits, and key price levels. The chart reflects a morning rally following a tactical re-entry at Php 70.85 and Php 71.20, with key resistance and support levels marked for strategic decision-making.
Cost Implications and Capital Erosion Analysis
Transaction Costs Impact
Php 1.00 Break-Even Differential: The impact of transaction costs was more significant than anticipated. With 12 transactions executed, these costs eroded potential gains, limiting profitability.
Frequent buying and selling without substantial price movements led to excessive trading fees:
Example: Selling 100 shares at Php 70.00 and re-buying at Php 70.85 or Php 71.20 increased costs rather than yielding profit.
Over-Trading
12 transactions in 3 days for a Php 15,000 portfolio is high-frequency trading, which is not suitable for a small-scale account.
Repeated tactical re-entries (e.g., multiple small buys on January 14 and re-entries on January 16) diluted capital efficiency instead of optimizing profits.
Effect: Instead of focusing on fewer, high-probability trades with larger price differentials, multiple entries and exits compounded transaction costs.
Capital Erosion from Unrealized Efficiency
Portfolio Impact: The Php -250.46 loss represents a 1.67% decline in equity in just two days.
Reasons for Erosion:
Small price differentials between entries and exits did not offset the break-even costs.
Tactical decisions did not fully account for transaction cost structures, leading to net losses instead of gains.
Key Observations and Lessons Learned
Frequent Re-Entries Add Little Value
On January 14, the portfolio executed seven buy transactions at different price points between Php 69.40 and Php 71.45.
Lesson: Consolidating these buys into fewer transactions at clear price zones (Php 70.00-Php 70.50) could have reduced costs and improved execution efficiency.
Inefficient Tactical Re-Entry
On January 16, two re-entry trades at Php 70.85 and Php 71.20 led to increased exposure at higher prices, despite limited upside potential given resistance near Php 71.50.
The subsequent tactical exit at Php 70.10 compounded losses, as the break-even cost differential could not be recovered.
Poor Reward-to-Cost Ratio
While tactical trades aimed for small gains, the actual cost of these transactions outweighed the potential rewards.
The small average price movement (Php 0.50-Php 1.00 per trade) did not justify the high trading frequency.
Strict Stop-Loss Execution Is Essential
The planned stop-loss at Php 70.10 was not executed, exposing the position to further downside risk.
Lesson: Implement automated stop-loss orders to avoid missing critical exit points due to manual execution delays.
Lesson: Have contingency plans for rapid price movements to ensure immediate responses to market conditions.
Recommendations for Improvement
1. Focus on Fewer, High-Probability Trades
Action Plan:
Reduce trade frequency and consolidate tactical entries into larger, well-timed positions.
Example: Instead of multiple small buys on January 14, one or two larger buys at key support levels (Php 70.00 or Php 69.50) could reduce costs while maintaining exposure.
2. Widen Tactical Price Targets
Break-Even Costs:
To offset the Php 1.00 transaction cost differential, trades must target price movements of Php 2.00 or more to be profitable.
Action Plan:
Only execute trades where clear technical indicators (e.g., support/resistance breaks, volume spikes) signal potential for larger price movements.
3. Use Stop-Losses Strategically
Observation: The stop-loss at Php 70.10 on January 16 was necessary but ineffective due to execution delays.
Action Plan:
Set stop-loss levels at key support points (e.g., Php 70.00 or Php 69.80).
Avoid re-entering trades unless strong upward momentum is confirmed.
4. Prioritize Cost Efficiency
Observation: Transaction costs are disproportionately high relative to the portfolio size.
Action Plan:
Reduce trade volume (focus on fewer but higher-quality trades).
Explore cost-efficient brokers or strategies with lower break-even thresholds.
Hold positions longer to minimize transaction costs.
5. Analyze Market Context Before Re-Entry
Observation: Re-entering at Php 71.20 after selling at Php 70.00 ignored the broader market trend and increased risk.
Action Plan:
Re-enter only at key support levels with clear reversal signals (e.g., green candlesticks with strong volume).
Conclusion
The Php -250.46 loss reflects the impact of frequent tactical trades combined with transaction costs. While the strategy demonstrated discipline with stop-losses and tactical exits, it lacked efficiency in minimizing trading costs and maximizing price differentials.
Moving Forward:
Focus on fewer, high-quality trades with larger price targets.
Be mindful of transaction costs and consolidate tactical actions to preserve capital.
Maintain discipline with stop-losses and re-entries only when supported by strong market signals.
This experience reinforces the importance of balancing tactical agility with cost-consciousness to ensure sustainable portfolio growth. By refining our approach, we aim to enhance capital efficiency while maintaining a structured, disciplined trading plan for future trades.
Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.
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