It probably had to happen.

I've been on a winning streak and haven't had any serious losses for some time now. Last week, two positions . . . long Apple, short Elan . . . went against me. The Apple trade, in particular, is worth analysing.

Before we get to Apple, a quick look at my other positions. I continue to hold CRH.

The stock hit new all-time highs last week. No complaints there. Nor do I have any problems with SanDisk. The stock continues to look weak, so I'm still short. It's hovering around $43. I've lowered my stop order (to just above $44) to protect my existing profits.

I also remain short on Elan, although that pup cost me a few quid last week. It bounced as high as $14.70 (a rise of 5% or so) over the past week. The one consolation is that the stock has been unable to rise above its 50-day moving average. If it does, I'm out . . . my stop is just above this point.

I've dipped in and out of Apple a few times over the past fortnight. The first trade was a short position which worked out nicely, with me taking my profits once the stock came into its 50-day moving average at $84. Fully expecting the bulls to come out of the woodwork at this juncture, I not only closed my short position but went long into the bargain. It was an easy call to make and, it seemed initially, a correct one . . . after dipping to a low of $83.62, the stock ended that day at $86.50 and I was 800 or so richer.

It didn't last. The stock resumed its weakness in the following days. Once the stock dipped below its aforementioned 50-day moving average, price support vanished and I was stopped out for my max loss of 700 after the stock dipped below $82.

Any regrets? Absolutely:

this trade was not handled half as well as it could have been.

Firstly, I should have taken some profits . . . reducing the position by a third would have been wise. Usually, I take a few quid off the table when my gains exceed my initial risk.

(That is, my maximum loss per trade is 700. I was up over 800 within a day, so I should have protected my profits by reducing my exposure. ) Secondly, I should not have waited for the stock to hit my stop loss under $82. I should have raised my stop loss order to under its recent low at $83.62. It was obvious the stock was in trouble when the 50-day MA was taken out. If I had done both of these things, I would actually have exited with a small profit. Instead, I took the full 700 whack.

I have no regrets over initiating the trade. Entering at $84 made sense and I'm glad I did so. Many traders make the mistake of thinking that winning trades are good trades, losing trades bad ones. It doesn't work that way. I've made money on bad trades and lost it on good ones. This trade had a little of both . . . a well-timed entry, a badly managed exit.

It could have been worse:

at least I obeyed my stop loss order and got out at $82. Revelations that federal prosecutors were looking at stock option administration documents that were apparently falsified by company officials in an effort to maximise the profitability of option grants to executives saw the stock open significantly lower (around $78) on Wednesday morning.

As soon as I enter a trade, I place a stop loss order. I'm not psychic, so placing a stop order is the only thing that prevents me from losing my shirt in the market. Not only that, using stops makes trading bearable for me. I don't have the nerve to do otherwise. Others . . . those with strong stomachs and small brains . . . think stops are for sissies and opt for the rollercoaster ride. Good luck to them, they'll need it.

The 'I'm-too-tough-to-usestops' brigade got away with it last week, with Apple recovering to close the day around $81. There was significant technical support around the $78 level. This level held.

Doubtless the awful headlines had newbie traders shorting like crazy at the open. The smart short sellers, of course, probably knew this information already . . . it would explain the recent weakness.

I was tempted to get long after the stock surpassed its morning high (instead of jumping in at the open, it can be a good idea to see how a stock behaves and go long/short on a break of the first hour high/low). I didn't, partly because I didn't want to spend Christmas monitoring a new position . . . the break has been nice . . . and partly because I didn't want to suffer another loss. If the week had been good, I would almost certainly have taken the day trade and made a tasty profit for myself. Psychology is everything in this business; I chickened out.

There are a lot of morals in the Apple story. Take partial profits. Cut losses. Use stops.

Know the technicals. Don't trade the open. Don't trade the news . . . the smart guys will sucker-punch you. And, finally, don't be a chicken.

In all, it's been a poor end to a good year. Market Monkey hasn't done too bad over the last few months (up 40%).

2007 could be good, it could be bad, but it won't be dull. Happy New Year and good trading.

Weekly gain/loss: . . . 1250 Overall balance: 34,950