Trading Strategies

Useful external links on trading strategies

“Begin With The End In Mind.”

1. Identify good companies with competitive advantages  OR  value stocks which has good earnings and recent rally to 52 weeks high (that is a little controversial), and has good trading volume (a few hundred thousands). This is to avoid liquidity risk.

2. Google for any recent bad/ good news on the company.
Check SGX stocksfact - Any recent Ex-dividend? Rights issue?

[You can also look at the volatility of the markets, the size of candles and much more to give you a feel into the momentum strength of the current market.]

3. Gauge your time horizon to hold positions (whether long or short) and do charting with that time frame e.g 1 month, 6 month, 1 year. Two snapshots of a time frame is ideal.

4. Charting:

- Review the macro and micro trends.
- Find trend, draw lines. Downtrend draw resistance line, uptrend draw support line.
(no trend don't enter, sideway stocks don't enter.)
- Determine the entry price (based on an established trend, indicators, risk-reward ratio or break-out point.)
- Determine the stop-loss price (based on resistance level, trend)

Managing Risks

5a. Position sizing by calculating what is a fair amount of shares to buy (risk not more than 1% of investment capital $$ and calculate based on the difference between entry and the stop-loss price). In a BEAR market can consider buying up to max 10k per stock (should not be more than 5% of total capital).

5b. Risk-to-reward ratio should be high eg. if it has more rooms for gain than loss at the target entry price then buy.

Trade risk = (Entry price - Stop loss price) x Quantity traded

5c. Figure out how much you are WILLING to lose if you are wrong. (Stop loss set up)

Let your profits run

6. If price still fluctuates within the trend channel, let your profit runs.
- Set trailing stop losses (based on new support levels) to reap profit before trend-reversal happens.

Trading for a Living animated book review

Trade your way to financial freedom (by Van Tharp)
1. Trading that fits
2. The notion of 'R'
3. Exiting techniques
4. Opportunity (of systems)
5. Position sizing (concept of % risk model)



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The contents of this blog are author's personal opinions and do not constitute advice to hold, buy or sell any securities, commodities or assets mentioned. I do not guarantee the accuracy and reliability of any information provided, and shall not be liable for any losses incurred from reading my posts or using the materials herein. This blog may contain affiliate links to external sites.