Overview of my trading process

I am attempting to do an overview of my trading process. Most of the ideas are scattered on postings made during the last three years.

This is an effort to organize it properly for those who are interested to have a deeper idea of the whole trading process.

How do I choose a stock?

This write-up gives an idea of my watch list,  some of the reading materials, favorite websites to keep up with what is going on in the market. There is definitely no lack of ideas floating around.

When I found a suitable stock for trading, I will move it either to my bullish or bearish list.

Trading methodology

http://zpring.blogspot.com/2009/01/my-personal-trading-methology.html

http://zpring.blogspot.com/2009/02/investor-or-trader.html

http://zpring.blogspot.com/2011/01/my-trading-process.html

In summary, I am an investor. But I am not a buy and hold investor. I trade. I align market sentiments and technical indicators with the fundamentals. Technical are used to confirm my beliefs on the fundamentals of a company.

An entry signal is given if the fundamental and technical indicators are in alignment, I will decide on various strategies.

From here, options are used to hedge my trade.

Strategies 

The strategies used are very straightforward and simple.

If the market is bullish, I will start with the stock, or stock with put ( married put ) or stock with a short call ( Covered call ). From here I manage the trade as the market changes. It is like a game of chess. You adjust your positions to win. It is written in this post.

The reverse is done if I am bearish.  I have also articulate the approach quite clear in this write-up.

About 10% of my trades are pure options play.  My favorites are credit trades ( verticals ) , Calendar and straddle / strangle.  Normally, I will wait patiently before entering a pure option trade as it requires a lot more maintenance and good timing. Because of my cautious approach, I am 90% successful on most pure options trade. The secret is to wait for the trade to come and forcing myself to do a trade.

In a posting, I have also written some rules for entering a credit trade. 

Many times, there are opportunities to do a very short term trading to capitalize on volatility crush. Usually, most of the trades go well.  But I have to wait for the right opportunity or timing to come along.

Technical indicators

Some of my regular indicators used are:

• Multiple timeframe – weekly, daily and hourly.
• Support / Resistance
• Trend channel
• Patterns – Fib retracement / Fib Fans
• Price actions – candles ( favourites : evening and morning stars )
• MACD / STO / RSI

I start with the multiple timeframes, trend channels and support/resistance to determine a stock.

I use Fibonacci Retracement, candlesticks and price patterns to determine the change in trend.

Finally,  MACD. STO, and  RSI are used only to confirm the directions.

Managing Risks

A key component of my trading is the risk control. Without risk control it nullifies the whole system. It is the Holy Grail of the trading process.

I have 2 write-ups on the risk management process.

http://zpring.blogspot.com/2010_09_01_archive.html

http://zpring.blogspot.com/2010/10/managing-risk-part-ii-set-clear-rules.html

After all trading to a large extent is a game of probability although there is also a substantial part of it are determined by  proper understandings of the fundamentals.

In this blog, you get a good idea of the whole trading process.  I have to admit that many parts are not written with a lot of details or clarity. However, there are lot of real trade examples.  One day, when I decide to write a book, all the ideas will be expanded with details.

Meanwhile, enjoy the blog free of charge.