In September last year I launched an experimental new model (virtual) portfolio called Riding the Rally. At the time, it had been a fairly dull summer in the markets, with both small cap and mid-cap indices underperforming the all-conquering FTSE 100. I decided to try and find a way to identify stocks enjoying strong short-term momentum.
My aim was to focus on momentum and not worry too much about fundamentals or the longer-term story. To try and select a short list of stocks to consider, I created a screen using the following rules:
(You can see the screen here, together with current results.)
I decided on an initial holding period of six months, but adopted two simple rules to try and cap my losses if things started to go south in a big way for any individual stocks:
20% stop-loss
Sell on profit warning
Six months can be a long time in markets. It certainly feels like it at the moment.
After a promising surge into the new year, the portfolio’s performance fell off quite badly through February and early March:
The result is that the portfolio underperformed the market substantially during the six months to 4 March 2026. Both figures exclude costs and dividends:
FTSE All-Share index: +13.7%
Riding the Rally portfolio: +7.2%
Portfolio review: too many changes?
You can read more about the initial portfolio in my original article. But my decision to adopt stop-loss and profit warning sale rules meant that five of the 16 original stocks were sold during the initial six month period. In four cases, I replaced them with new stocks.
In a recent Daily Report, Mark commented that stop-loss rules can sometimes become guaranteed loss rules in volatile markets. I decided to test this theory against the trading activity in the Riding the Rally portfolio since September.
It turns out that if I’d kept hold of each of the stocks I sold, a surprise recovery from one company would have meant that the aggregate loss I suffered would have been smaller:
| Company | Sale Reason (Date) | Actual loss | Loss on continued hold |
|---|---|---|---|
Secure Trust Bank (LON:STB) | Profit warning (09-Oct-25) | -9% | +29% |
Works co uk (LON:WRKS) | 20% stop-loss rule (04-Nov-25) |
