I made my 2nd and 3rd trades for 2022 – Rio Tinto short and Champion Iron short via CFD..
- Rio Tinto
- shorted from 14-18 Jan at 110.12 – 110.60
- closed on 19 Jan at 110.159 to 110.68
- position size is $120k
- incurred net lost (including commission and holding charges) of about $100
- Champion Iron
- shorted from 17-18 Jan at 6.27 – 6.46
- closed on 19 Jan at 6.26 – 6.28
- position size is $180k
- incurred net profit of about $2.9k
Why I Entered the Positions
- This is a short-term trade against iron ore prices
- Iron ore commodity prices may have peaked
- Iron ore-related stock prices may have peaked
- Fundamentals have not turned around yet to validate optimism in iron ore stock and commodity prices
Why I Exited The Position
- China started to ease financial conditions, buoying sentiment for iron ore at least for the short-term
- Iron ore commodity prices starting to surge
- Iron ore-related stock prices seem to have more short-term upside momentum
This is one of the cases where it pays to be agile. I closed the positions quickly when China started to ease conditions and was fortunate enough to still make a small profit.
Sometimes, there is an initial over-reaction at the open and prices rise/fall too much relative to the impact of any fundamental event. In such cases, closing positions too quickly at the open may not be optimal. Experience trading in the stock/sector is needed to make accurate judgement calls.