Hi, Welcome to Frank’s Corner! for this introduction article, I will write briefly about my trading strategy, so that on the next article, you can get a better understanding on the perspective on what I am looking at when I am targeting a security.
My trading strategy is somewhat a mix of Fundamental Analysis, Technical Analysis, and Price-Action Analysis.
Let me elaborate a bit on each of the subject. (it won’t be long because I don’t want to bore you with the complexity of each analysis right now :D)
The function of fundamental analysis in the strategy is to make sure that I have my version of “margin-of-safety” that was popularized by Benjamin Graham (for those of you who don’t know about him, he is the mentor of Warren Buffett). On this fundamental side, I strongly emphasize on “Catalysts”. Because my strategy is not so long term, so I can’t heavily rely on valuation on the book (and to put things on perspective: we can’t really trust the book by 100% right? The world can change, things can evolve, so the book, aka financial statement is not the sole determinant of my strategy).
Let’s talk about Catalyst then: it is the thing that can send the price of a securities to the roof in short period of time, things such as new government regulations, company buyout/M&A (Merger and Acquisitions), change of management, and so on and so forth, can be categorized as the catalyst. Now, what we can do is to read a lot about listed companies, and if we are lucky, we can found companies that might be a take-over target!
I usually use a Classic Technical Analysis in analyzing the securities that I’m about to buy. So, what is this Classic Technical Analysis? It is the technical analysis that use trendline, volume, and chart patterns, to project the next moves of the bar. It’s a really simple analysis, for me, Technical Analysis should be as simple as possible, because things change on the market, and we have to be super adaptive! If we got paralyzed during the market action because of the confusion caused by our complex analysis, then we are bound to fail. So, my stance is: Classic Technical Analysis is the best tool for taking action in the market.
By watching the price movement on the our trading screen, actually we can obtain a lot of information regarding the natural support and resistance of any particular stock that we are targeting. It’s a bit hard to tell because it has different outcome on different situation. But if a particular stock is acting fishy, then we might want to observe the price-action in a greater detail, because there might be funds that are accumulating/distributing the stock, thus this can take the price of the stock a lot higher/lower from current price.
So, all in all, this summarized my trading strategy. Feel free to share or ask anything regarding trading strategy, we might learn something new along the way.
Frankie, 18th of March 2017
On a Cloudy Saturday Afternoon