My personal trading methology

I believe in fundamentals. These are the key to business performance. When I look at a stock, I like to know its business models, earnings record, cash flow and strength of management. But often, fundamentals do not work because it takes a lot of good information-which is lacking-to really understand a business. It takes real skill to understand the success of a business just from its reported financial information. Even the Board of Directors cannot predict the eventuality of their own business. Second, the market price often reacts in a herd fashion before the fundamental strengths are recognized. In other words, fundamentals are important but they should not be the main determinants of stock price movements. In a way, I find it hard to be a 100% VALUE-investor because it is hard to determine value.

So, timing is important despite what many fundamental-investors say that it is impossible to time the market. We have people like Warren Buffet and Jim Rogers who can hold on to stocks indefinitely until they come back to their value. This downturn, however, has been a disaster to many value-investors including famous legends like Bill Miller and Legg Mason. Some of them are 60% down in their portfolios. Even Warren Buffet, the most successor stock investor in the world, has lost 30% of his value. When I was on the Board of Directors of a number of public listed companies, I find it hard even to predict the short term price fluctuations within 6 months, even though I had insider information.

I use a number of technical analyzes to help me with the timing. These are never perfect but at least they help me pin point the tops and bottoms of markets. And, when I am wrong, I will normally cut loss immediately and try out the next peak or trough for shorts and longs respectively.

Many of the technical-analysis techniques are very questionable and worthless. But no one can deny emotions and clear trends in the market, which are analyzed by some of these techniques. Stocks get over-bought, over-sold and sometimes for extended periods of time. The key objective is to ride the trends. My favorite indicators are tools commonly used to measure trends and emotions.

My basic steps are:

·Have a direction on the indices. Focus on the “now moment opportunity” when the stock has reached the turning point of a “high” or “low”. Technical indicators used include trendlines, moving averages, momentum and price patterns to determine these points.
· Proceed to add long or short positions from list of stocks in a diversified watch list which consists of technology, pharmaceuticals, financial, gold and oil stocks. I have some good understanding of the fundamentals of these companies and this helps me to decide whether I should go long or short. From each individual price charts, determine my entry and exit positions.
· For oil, gold and finance, I use a number of ETFs – some with 2x leverage to give me a better ride. There are a number of new ETFs with 3X leverage which I starting to use it successfully.
· From here I take a directional bet. It is a probability game but I believe I have the edge because of my fundamental and technical analyzes.


Important principles

· Execute the trading plan consistently. This means you have to trigger the pre-determined entry and get out at the risk calculated if you are wrong.
· Take profit frequently especially when stocks are statistically out of the trading-band, greatly oversold or overbought. Extensive experience has taught me that these stocks will revert to the mean while you are feeling really high!


My watch list consists of 50 counters and I trade about 4-5 counters each day depending on the market conditions. In my portfolio, I keep a list of around 15 stocks.

I am planning to elaborate more on specific details as I continue to write on the blog.