Developing a Strategy

S

sibya

Folks,

Work full time and made a lot and lost a lot, which has finally led me to develop a strategy. Below is one I am developing, it is fluid and open to suggestions. It has taken "inspiration" from more than one source and I would like your feedback :

1. The step by step small to mid-cap analysis:
a>Spread under 10%?
b>What is the company’s plan to make money?
c>What is the the game changing catalyst(s)?
d>Is the cash-flow a likely issue for the price?
e>How many shares in circulation and their make-up?
f>Quality of management?
g>It’s relative strength to the overall market?
h>Glance at upcoming macro economic events?

2. Money Management - (100% investment capital divided into 80% for 8 stocks (8x10%) updated daily to reflect actual portfolio)

3. Always Use a Trailing Stop Loss - with support/resistance, once moving using swing low and high points taking into account bid-ask volatility spread, to lock your profits and stop your losses, with initial trailing stop under a support base,a swing point low and lowest bid. [or could I use ATR of 5 instead?]

4. To Buy - (1)Buy on first pullback from breakout from a base (bigger the base the better) OR (2) Buy when in consolidation base near support OR (3) Buy on breakout from base(remember bigger the base the better ) - It all depends on upon how well you know the stock and sometimes the GAP up or down reaction.
Buy always before closing bell (unless it looks very convincing -i.e. fantastic RNS/rapidly increasing bid) if it is finishing higher than open for (1|2|3) in half's (again unless it looks very convincing)- tranches of 50% and 50% on the declining/rising swing low|high pullbacks) - taking into account bid-ask volatility spread[or could I buy in thirds instead?]

5. Initial Profit Target - This can be done by checking previous resistance or for new highs, by measuring the distance between support and resistance of the consolidation base, though remember to allow profits to run and look for stocks that can at least double your money.

6. Keep TA Simple - support/resistance/trends and patterns taking into account bid-ask volatility spread price and nothing else [indicators merely confirm afterwards -thus useless]

7. No Holy Grail and Patience - Accept there is no holy grail strategy, only discipline and patience is vital for entry and exit

..Now anyone got an opinion on the above?
 
Depends entirely upon your ability to accurately develop a metric to quantify your items 1.a - h. Some are straightforward but some are very open to interpretation.

And then you have to be able to analyze and apply your methodologies uniformly across your sampling population.

If you succeed with items 1.a. through 1.h., just go ahead and collect your Nobel Prize money, accept a highly paid honorary seat at a think tank or university, and write a book. Great income, and God knows you would be more worthy of the Nobel than that dolt Paul Krugman.
 
Quote from sibya:

Folks,

Work full time and made a lot and lost a lot, which has finally led me to develop a strategy. Below is one I am developing, it is fluid and open to suggestions. It has taken "inspiration" from more than one source and I would like your feedback :

1. The step by step small to mid-cap analysis:
a>Spread under 10%?
b>What is the company’s plan to make money?
c>What is the the game changing catalyst(s)?
d>Is the cash-flow a likely issue for the price?
e>How many shares in circulation and their make-up?
f>Quality of management?
g>It’s relative strength to the overall market?
h>Glance at upcoming macro economic events?

Consider reorienting to one "kind" of stock.. Diffferent "kinds" require different techniques.

2. Money Management - (100% investment capital divided into 80% for 8 stocks (8x10%) updated daily to reflect actual portfolio)

cut to four stocks. you will be in mental trouble with 8 and the variation in "kinds"

3. Always Use a Trailing Stop Loss - with support/resistance, once moving using swing low and high points taking into account bid-ask volatility spread, to lock your profits and stop your losses, with initial trailing stop under a support base,a swing point low and lowest bid. [or could I use ATR of 5 instead?]

Your intial stop is faulty. By constraining your kinds of stocks, you can get to trading only quality stocks which do not have the support base, swing low nor lowesr bid characteristics.

the rest of your post is about trading. It is incomplete and below the minimum for success

4. To Buy - (1)Buy on first pullback from breakout from a base (bigger the base the better) OR (2) Buy when in consolidation base near support OR (3) Buy on breakout from base(remember bigger the base the better ) - It all depends on upon how well you know the stock and sometimes the GAP up or down reaction.

do not use a selection of entries. there is only one good entry (you missed this one)

Buy always before closing bell (unless it looks very convincing -i.e. fantastic RNS/rapidly increasing bid) if it is finishing higher than open for (1|2|3) in half's (again unless it looks very convincing)- tranches of 50% and 50% on the declining/rising swing low|high pullbacks) - taking into account bid-ask volatility spread[or could I buy in thirds instead?]

A successful trade is KNOWN very early in the day the trade begins. Only later on when you have skill will you be buying to reduce hold time and raise the compounding exponent

5. Initial Profit Target - This can be done by checking previous resistance or for new highs, by measuring the distance between support and resistance of the consolidation base, though remember to allow profits to run and look for stocks that can at least double your money.

Trading stocks is not related to profit per trade. It is related to minimizing hold time per trade and taking the middle half of the run. Profit per trade is guaranteed by the Universe of stocks you trade.

6. Keep TA Simple - support/resistance/trends and patterns taking into account bid-ask volatility spread price and nothing else [indicators merely confirm afterwards -thus useless]

consider switching to trend aalysis (this is different than trend following).

7. No Holy Grail and Patience - Accept there is no holy grail strategy, only discipline and patience is vital for entry and exit

Making money in trading is done by market timing. If you had a TA approach, you would be using leading indicators of price for the trade. Seling is based on the need for capital to get into a better opportunity. Buying is taking better opportunities.

..Now anyone got an opinion on the above?
More...

Everyone has opinions on your post.

You got a sponsor to respond for his selfish reasons at your expense.

Trading is making maximal use of the compound interest formula.

A rough outline of a year would be to take 1,000 dollars to 1 million dollars, position trading a stock Universe. This means you can take a few extra weeks to get it straight. It also means you do not have to work for others or have clients.

This is doing two trades a week @ 10% a turn with a given stream of capital.

Each time you miss all it costs is the time to do the wash trade.

There is no need to use charts either if you just want to operate by using a simple hand held electronic device and spend your time on other activities.
 
Developing a wining strategy has more to do with having a coherent thought process - and yours seems quite coherent.

I would recommend the book "Inside The Black Box, The simple truth about quantitative trading" by rishi k narang (it's a fast read)

His approach to analysis is generally applicable to any trading system. What he discusses is a regimented thought process.

What he does Not discuss is discovering a collection of nifty trading tricks (even though this is Definitely a good thing to have).

My 2 cents.
 
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