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Read The Disclaimer
Using The 10-20-30 Moving Averages Rule For
Trading Cisco
5 Years Of Cisco Trades Using Moving Averages Strategy
Part 1 - 2006 to 2007
Trading Introduction:
Trading
article by J. Fergus - compiled, edited
and presented by Teddi of
Fullyinformed.com
I have
known Teddi for many years. Teddi
introduced me to the 10-20-30 moving
averages strategy back in 2005. Just
to recap, the 10 day simple moving
average with the 20 day exponential
moving average and 30 day exponential
moving average can be used to time my
trades for purchasing and selling a
number of stocks. Teddi uses it for
options. A good understanding of the 10-20-30
day moving averages strategy can be
found here. I paper traded the
strategy for 2005 and part of 2006 and
did quite well. I decided to then use
real capital to apply it to a number of
trades.
With so many investors
moaning about Cisco Systems, I thought I
would give these trades to Teddi to put
on the site for others to consider and
possibly re-think their approach to
Cisco and perhaps other stocks as well.
The trading details and comments are
mine. Teddi did all the charts, revised
my comments so they can be followed by
readers and put together this article. I
understand fullyinformed.com is donation
supported so if you find value in my
trades I hope you will use the tip jar.
While no strategy is perfect or foolproof, I use
this stock moving averages strategy to help
time my moments when to buy stock and
sell it. As well I enjoy selling
uncovered calls when the opportunity
presents itself. I do not sell puts.
Unlike Teddi I have never really been
good at timing my moments to sell puts
and I am a short term trader. I have no
interest in selling puts 6 months out as
that is too long a time frame for
myself. As Teddi always says, you have
to be comfortable with your trades and I
like short term trading.
Selling uncovered calls is a favorite of mine as I see no
reason to be worried about selling calls. For one
thing, stocks tend to fall a lot faster than they
climb. For this reason alone I never enjoyed selling
puts. I believe selling uncovered calls is excellent, for if the
stock recovers I simply buy the stock and turn the
trade into a covered call. To me this seems so
natural, as what I want is for the stock to rise,
not fall. I think we are all somewhat optimistic as
investors and as such we want stocks to rise and
reward us. When stocks fall that's when I consider
selling uncovered calls. It's the optimist in me. I believe
the stock should rise and by selling uncovered calls I feel I
have placed my bet on the stock rising to meet my
strike. If the stock fails to rise, then I have
benefited through the call I sold, while waiting for
the stock to recover.
I started the trade in Cisco in the summer of
2006. I have broken this trade into years to make it
easier to follow.
Date
Comments & Action (all figures include
commission charges)
Debit/Credit
Balance
Aug 18 2006
Bought 1000 shares at $20.55.
I had been following Cisco Systems stock for
some time and noted a
very clear break to the upside. Both the 10
daysimple moving average and 20 day
exponential moving average crossed over the
30 day exponential moving average. I
bought and was quite pleased when the next
day the 10 day simple moving average widened
from the 20 and 30 day EMA. This I have
found through paper trading is a good
bullish sign.
(20554.95)
Jan 29 2007
Sold 1000 shares at $26.20
This was a pretty easy trade. The 10 day
simple moving average fell through both the
20 day EMA and 30 day EMA two sessions
earlier. I really show have sold these
shares last week, but I had hoped for more
upside.
26195.05
5640.10
Feb 15 2007
Bought 1000 shares at $27.50
The 10 day SMA (Simple moving average)
crossed the 20 day EMA (exponential moving
average) and 30 day EMA. You
can see from the chart that in hindsight, it
was a bad purchase. These things happen
though as there is no guarantee that any
strategy is foolproof. I have also found
that to win with any strategy requires
consistency. The strategy showed a buy
should be done, so I placed the trade.
(27504.95)
Mar 7 2007
Sold 1000 shares at $25.97
Luckily for me, the stock had pulled back up
from its recent sell,
but the 10 day was falling further. I
therefore stuck with the strategy and sold
my shares.
25965.05
(1539.90)
Apr 25 2007
Bought 1000 shares at $26.55
The 10 day simple moving average crossed the
20 and 30 day EMA two sessions earlier. It
was time to buy shares again.
(26554.95)
May 24 2007
Sold 1000 shares at $25.77
In hindsight I should have sold a few
sessions earlier when the 10 day began to
turn down. I decided after this loss that I
would close earlier when there was a profit,
rather than take a loss when the 10 day
crossed the 20 and 30 indicating a move
lower. I know from paper trading that the
moving averages strategy is following
momentum and therefore it will be delayed.
25765.05
(789.90)
Jun 26 2007
Bought 1000 shares at $27.12
Again, the 10 day SMA crossed the 20 and 30
day EMA, telling me to buy shares.
(27124.95)
Nov 1 2007
Sold 1000 shares at $32.35
The last couple of sessions the stock rose
but the 10 day SMA stayed below the 20 and
30 day EMA. I didn't want to take
a loss after holding the stock since June. I
decided to sell. In hindsight I could
have waited a couple more sessions but at
the same time the stock then fell hard in 5
more sessions, so
it was good to lock my profit in.
32345.05
5220.10
TOTAL INCOME TO NOV 2007 - $8530.40
Largest Amount Invested - $27124.95
Return on capital - 31.4%
Summary To End Of 2007
I learned a few things about using this strategy, but the most important was to close the trade early by selling my stock when the profit is there and it appears the 10 day may be turning
down. It is better to make a profit even if it means I close too early and could have earned more.
The most important aspect was to not lose the
profit.
