How to avoid compulsive portfolio monitoring. Making use of Price Alerts, RNS Alerts, Limit Orders and Stop Losses

I am starting to get quite a few emails from new investors who want my opinion on various topics, so I thought I would cover a few ‘beginner pieces’ over the coming weeks, hopefully putting together a few blog posts which stock noobs can find accessible.

One of the things I have started to finally perfect in my 10th year in the stock market is just checking into my portfolio 1-2 times a day. This is still too much in my opinion but this is way down from the 15-20 times a day I used to check during the early years. Why is this so important? A key part of being a successful Investor or trader is having discipline, the more times you check in on your portfolio the higher the chance there is of trading on impulse rather than trading on clear rationale. I share four handy ways that can reduce the time you spend in front of your share portfolio and hopefully lead you to make better trades as well as saving time…

1.Price Alerts

There are numerous price alert services which will email/text/push you when a certain Buy or Sell price is reached. If you have done both your fundamental and technical research then you should have very clear price targets in mind. This is where the risk/reward favours a buy or where the stock becomes overvalued and you may want to consider selling, or at least derisking.

By far the best price alert service I have seen is through the IG Index Stockbroking account, a screenshot of which is below:

IG Alerts

The service allows unlimited price alerts on any stock (you don’t need to own the stock already), which can be set for BUY and/or SELL prices. Each time a target is met IG will alert you within the trading platform, but perhaps more useful an email notification and/or a push to your Phone or iPad.

I prefer price alerts as I tend to trade manually as sometimes some further rational thought is required before placing the trade, but you can also automate this step too…

2. Stop Losses

I will assume that you are an inexperienced investor and therefore using a typical execution only Retail broker, i.e. one who places orders through a specialist Retail Service Provider (RSP) Market Maker. Most retail brokers allow you to place Stop losses which can help you to manage your risk and deal automatically on your behalf. I won’t get into how to use stop losses as part of a risk management strategy in this piece, I will aim to cover this in another post. A stop-loss though is where a number of shares defined by you is instructed to be sold at a price defined by you. The price you set though will not necessarily be the price the stop-loss is executed – more on that later. Here is what a typical stop loss order screen will look like, using Hargreaves Lansdown as an example:

Screen Shot 2017-04-13 at 11.49.15

As touched upon above, a stop-loss is not a guaranteed to achieve the sell price you have determined or even be executed at all. This can happen for a number of reasons, but here are the three most common:

  1. During periods of volatility the market may move quicker than the market maker can accept your order. This could also be where the price quoted by the market makers is not the real price and trades are being negotiated manually.
  2. Even under less volatile periods a stop loss can fail to execute at your desired price if there are limited buy orders available at the level you wish to sell. This is realistically only likely in the smaller stocks, normally where you are dealing in larger sizes but sometimes even smaller sizes (c£1000) can be an issue in very illiquid stocks. Pay attention to the Exchange Market Size which can be found on the London Stock Exchange site, example here. The EMS is the number of shares a market maker under normal conditions is obliged to deal in. If your stop orders are for a number of shares higher than this, then there is a chance the stop loss may fail or not achieve your stop price.
  3. When news is released, the market may ‘gap up’ or ‘gap down’ as orders are placed in the market on SETS. On stocks where market makers are present, i.e typically smaller stocks which use the SEAQ platform, these market makers may set their buy price at a level significantly below your stop loss.

The end result, the stop loss may be triggered at a level materially below your stop loss. You should think of a stop loss as an instruction to stop, not a guaranteed stop. This is why I rarely use stop losses or Limit orders as I like to take some time to understand the price action before executing. I therefore tend to use price alerts, but stop losses can be useful to limit risk where you are unable to get online for extended periods.

Some brokers, such as Barclays StockBrockers also offer trailing stop losses, which are very useful if you want to lock in profits, as the price moves up the stop loss position also moves up. For example:

You buy a stock at 100p with a trailing 10% stop loss, i.e at 90p. The price increases to 150p and your stop therefore increases to 135p. The share price then falls to to 134p and the the stop is triggered at 135p.

Note – all of the same issues  as above are still valid with trailing stop losses, but one way to avoid some of them is to place orders directly at the exchange, using Direct Market Access (DMA) and skipping out the middle man, i.e. the market maker. I will cover this in detail in a further piece but this allows orders to be filled with more precision, but is too advanced for this post.

3. Limit Orders

Limit orders work in a very similar fashion to stop losses and there are two types of Limit orders, BUY and SELL orders. A BUY limit is where a Buy order is triggered when a price falls to a level as determined by you. A SELL limit is an order to sell a stock once the sell price reaches a certain limit.

Most retail brokers will not execute if the limit order price moves against you between the instruction triggering and a quote being received from the RSP:

Say a BUY order is placed to purchase a stock at 200p. The share price falls from 210p to 200p and the order is placed, however there is a wave of other BUY orders from other market participants at this level, which means very little stock is available to BUY at 200p and the Buy price moves to 201p before your order can be executed. The BUY order is not executed and returns to pending.

This buy order will not be dealt and with most brokers will return to pending. Do check with your individual broker though how they deal with Limit orders.

4. RNS Alerts and other Market News

Regulatory News Service (RNS) is the platform where all UK companies must release price sensitive news. Clearly macro news and other newspaper rumours can also impact the share price also, the most convenient and free way to receive this information instantly is via Vox Markets. You will receive notification pushed to your phone or desktop as soon as a company you follow releases information or is covered in any of the major newspapers. This free service should help you avoid continual checking of news feeds and just sit back and wait for a notification. There are also similar services, such a Investigate which will email you on the release of a company RNS.


Placing some reliance on the above tools should reduce the time spent staring at your portfolio. My suggestion is to use the time instead to do so research on your portfolio or on some of those companies on your watchlist. Or even dare I say it go out and get some fresh air!

CloudTag – A nervous weekend for longs and shorts.

Disclaimer: Shareinvestors is not authorised by the Financial Conduct Authority to give investment advice. Terms such as ‘Buy’, ‘Sell’ and ‘Hold’ are not recommendations to buy, sell or hold securities, these statements and other statements made by the author have the meaning only to express the author’s personal views on the quality of a security. Independent financial advice from an authorised investment professional should always be sought before making investments. CAPITAL AT RISK. Full Disclaimer here.

wrote about Cloudtag earlier in the year and called this out as a SELL at the time. I was almost 100% down on my SELL call at one stage this autumn, however since then a very interesting financing arrangement has been entered into by Cloudtag. There has been some very good coverage of this agreement at Share Prophets so I won’t go over this again. However this financing agreement has seen the shares drift down from 20p at the October peak down to below 6p at the start of the month. This week though they exploded into life again jumping 166%, from 6p to 16p. After falling back somewhat again after two mid week ‘speeding tickets’ an announcement was made by AIM today that Cloudtag shares were suspended with immediate effect. Full text:

Trading on AIM for the under-mentioned securities has been temporarily suspended from 9/12/2016 3:26pm pending an announcement.

Speculation reached a frenzy on social media whereby everything from a Joint Venture with a Chinese mobile phone company to the Serious Fraud Office kicking CloudTags door down was speculated upon.

A hint may have been given though right at the close of the RNS day, a conversion notice was received in respect of the convertible loan notes as follows:

CloudTag (CTAG:LN), the company that brings personal monitoring to the wellbeing, fitness and digital health markets hereby announces that after market closing on 7 December 2016 it received a notice of conversion in respect of £1,150,000 of Tranche 1 Notes (based on the nominal value of such notes) issued to L1 Capital Global Opportunities Master Fund (“L1”).

The conversion of £1,150,000 of Tranche 1 Notes at a conversion price of 6.0 pence per Conversion Share (“Conversion”)

The plot thickens, Cloudtag has been sitting on this information for 48 hours, the notes were converted at 6p and yet the stock was allowed to open on December 8th at 15.25p, 2.5x greater than the L1 exercise price. L1 has made a killing here but that is not the primary issue actually even though it feels so immoral, 19m shares are to be issued as part of the conversion, i.e. almost 5% of the total shares in issue. This is a material amount and under AIM Rule 11 the market should have been notified immediately, i.e. as soon as Cloudtag knew – i.e 8th December 7am. Many questions, why did it take 2 days to notify the market? Was this deliberate or something more sinister? Is this connected to the suspension of the shares? It is very interesting to note an EGM on Monday morning (12th December) where resolutions are put forward to increase the authorised share capital to allow for further tranche of the convertible to be issued.

So Is there a connection between the conversion and the suspension?

My feeling is yes, but we will need to wait until at least 7am on Monday. Shares are generally ‘suspended pending an announcement’ for breaches of AIM rules or in order to comply with AIM rules, i.e. NOMAD quitting, directors quitting or an activity constituting a RTO. Another reason is potentially a credible leak of information which needs clarification, i.e. to prevent ‘those in the know’ from profiting. Any other price sensitive information should be released via a standard RNS and should not require a suspension. So why the suspension in this case? For the bears – In the case of cloudtag there have been a number of well documented Red Flags and the NOMAD could have decided to go if it feels it can’t act for Cloudtag. For the bulls maybe not – there is a new product launch due in a week, could it be that product details may have leaked?

I would probably land on the former rather than the latter, if the announcement relates to the product I would have thought a holding statement would have been put out. Why make shareholders suffer over the weekend? Also twice this week Cloudtag has stated in RNS that it is aware of no further news not in public realm. Bearing in mind most of the City is getting lashed at Christmas parties around EC1, it must be something very significant. That said I wouldn’t be popping the champagne if I was a short just yet either.

Cloudtag is an immensely popular retail stock and I hope genuine holders do not get burnt, especially so close to Christmas. One thing for sure this whole episode promises to be nothing short of a pantomime.

Final point just for information; here is the fate of the last 5 companies where an unexpected AIM ‘pending an announcement’ RNS has been put out…


Disclaimer – I have no positions in this stock and to my knowledge nor do any close family, friends nor associates. This post is purely my opinion and should not be taken as financial advice. I welcome any alternative comments and will consider adjusting posts based on information made available to me.

Fundamental Investing – 10 commandments

Disclaimer: Shareinvestors is not authorised by the Financial Conduct Authority to give investment advice. Terms such as ‘Buy’, ‘Sell’ and ‘Hold’ are not recommendations to buy, sell or hold securities, these statements and other statements made by the author have the meaning only to express the author’s personal views on the quality of a security. Independent financial advice from an authorised investment professional should always be sought before making investments. CAPITAL AT RISK. Full Disclaimer here.

I’ve been investing in the stock market for a decade now and in most years I have been beaten the FTSE100 by some margin. You can take a look at my more recent performance in the ‘My Trades’ section of my site.

I get a few emails asking for my approach. There is no universally accepted way to invest, otherwise we would all be millionaires. Here though are the 10 rules I stick to religiously, which have served me well:

  1. Fundamentals above everything else – Cash is all that matters in the long term.
    Remember that a stock’s true value is the discounted present value of future cashflows. When you value a stock you should always think about the actual or potential cash generated and not get distracted by anything else. Earnings, e.g. ‘EBITDA’, or even worse the dreaded ‘ADJUSTED EBITDA’ are often nothing more than PR. The first thing you should look at when a company releases results therefore is the cashflow statement.
  2. Never, ever invest without doing research.
    This doesn’t mean reading a couple of house broker notes, instead this should be balanced research which includes preparing your own valuation of the stock. As with rule #1, this valuation should be based on the potential for future cash development and your view on the risk/reward profile. I typically spend 10 hours on a stock before going anywhere near the buy button, you should do the same. It is so tempting when you see a share rocket to try and jump in, I have been guilty of it myself, but more times than not I have lost money, particularly on ‘penny stocks’ when at times you need a stock’s mid price to rise 10%+ to even get out of the market maker’s spread. So unless you want to spend all day staring at level 2 praying that the book turns in your favour then avoid this. Remember, there will always be another trade or investment opportunity. Final point – only when you can place a BUY order with confidence and you don’t feel the need to keep a constant watch on the share price, is when you have done enough research.
  3. Employ Targets rather than overtrading
    Set yourself a BUY and SELL target on each stock you research and stick to it religiously and only adjust this based on newsflow. It is very tempting to sell out at 10% profit or 20% profit but some of the biggest mistakes I have made is not letting my winners run. If you still believe there is upside why sell? By the time you add back stamp duty, transaction fees and the market maker spread you may need the stock to fall by 3-6% or more before a re-entry is economic.If you are getting anxious once you reach your SELL target, then consider to place a stop loss in to lock in some gains at a few % below the current share price, you might be able to let your winner run longer this if you repeat this approach. Remember sentiment drives the market as much as fundamentals. The later always beats the former in the longer term though.
  4. Be a cynic, look for the worse in everything.
    Question everything. The city is a very seedy place and you should be skeptical of everything, especially rumours but also information released by the company. With rumours, even when they come from credible news outlets they often turn out to be spoofs, which sadly can be attempts to drive the share price higher. This ‘whisper’ can often be driven by someone with a major position can exit. This is particularly true at the junior end of the market. When it company released news (RNS), don’t forget that companies employ PR firms to put positive spin on stories. You need to look beneath the PR.
  5. Momentum Trading – it has it’s place
    Don’t be tempted to jump into a stock based solely on momentum, you can make money on this approach but it is not investing, it is really no different from playing the casino. Instead be patient and do your research – rule #1.Don’t hate traders and chartists that play on momentum though either, love them. They are the guys who can often drive a price in a certain direction, this creates opportunities for us fundamental based investors. There are though always points where a stock becomes very cheap and very expensive, if you know the stock well you as a private investor can nimbly jump in (and out) at the right moment – this gives you an advantage over institutional investors.
  6. Beware Leveraged Companies
    A business model can be great and the company can be generating cash at an operational level, but watch out for companies that are highly leveraged. I’ve seen too many companies which are viable but the equity is practically worthless.Always remember that the debtholders have legal right over shareholders in the event of a liquidation. If debt covenants are breached the threat of these powers can be used for the bondholders to acquire assets often well below market value. Very rarely do shareholders escape with anymore than a few % of the company in these situations. Don’t be tempted to jump into distressed companies without doing a lot of research.
  7. Be prepared to cut your losses
    If new information is released which materially alters your valuation of the company downwards then be prepared to sell. One of the most common mistakes that new private investors make is to constantly average down on their loss making holdings. Accept that you will make bad investment decisions on occasion and learn from the mistake. What separates the long term winners from the losers is those who are not afraid to cut their losses.
  8. Risk Management
    Create a balanced portfolio and review your portfolio regularly. Through this ensure you are not too focused on one industry, or even worse one company. You should also compare your performance to a benchmark such as the FTSE100 total return index. If you regularly come in lower against the index you might be doing something wrong.
  9. Don’t over diversify
    Conversely to rule #8, avoid also having too many holdings, the maximum number of shares and funds in my opinion you should have at one time is 20-30. It is far too difficult to keep track of more than 30 holdings but also the more holdings you have the more likely you are to achieve the benchmark returns, so why not just buy a index tracker instead? I have around 20 stocks and 10 trusts across all my investments, ISA, SIPP and trading accounts. I know these 30 investments inside out and I can sleep easy at night knowing I have researched them well. Think Macro as well as Micro, particularly on trusts to ensure you are positioning yourself to where you think things will move towards. For example, is it time to start loading up on gold if you think uncertain times ahead?
  10. Learn From Your Mistakes and be Disciplined
    Embrace your mistakes. For every investment that goes wrong and you lose money on, spend some time reflecting on why. I always write down the key reasons why it went wrong for me and try and take away a few points to learn from. Don’t beat yourself up, particularly for black swans! I also keep a record of all my closed trades and assess whether I sold at the right time, if the stock went on to add another 10%, why? Some final advice – Develop your own investment handbook to capture your own learning and develop your own rules which work for you and that you promise you will stick to. The best investors I know are the most disciplined people I know. Good luck!