Thursday, June 26, 2008

MY TRADING SYSTEM

As you might have figured from my blog, I am basically a fundamental investor, though I reserve a small portion of my portfolio for trading (not day trading though, my typical investment period for a trade is about 30 days). My oservations on my trading experience are as follows.
1. It does make the whole process more exciting.
2. I use traditional charting methods like candlestick patterns, price patterns, moving avgs etc.
3. I am a long only trader. So no shorts & no F&O.
4. You can make money trading, but I don't know the sustainability of such returns since my fundamental investments have been over some time while I started trading only recently. However my trading returns till now have been positive.
5. Taking small losses and executing strict stop losses are the key to success. Easier said than done though.
6. I generally trade on the same stocks I hold in my fundamental portfolio. Thus I can save on STCG tax.
7. Whatever profits I make on trading I withdraw from the market. In case of losses I do not replenish my lost capital, but trade on the reduced capital.
8. I am not a compulsive trader. I buy whenever I feel comfortable and maintain inactivity if I get a bad feeling about the markets.
9. I generally try to guess the direction of the markets over a period of 2 -4 weeks and go long if I feel good about it. For instance I recently bought some Infosys. I already hold it in my long term portfolio. My logic is that Q1 results are expected to be good, and markets do not seem to have discounted this at current prices. So I am looking at an upside of about 15 % in about 2 weeks, while if it does not perform I will have some more of a good stock in my portfolio.

2 comments:

Uma said...

That's Warren Buffet stuff! But I'm the sort of person who is forever looking for the quick buck and believing that I'm smarter than the street. Refusing to acknowledge that millions others are thinking the same thing and losing money like me. It's true, speculation profits do not last, atleast I need more mental discipline to make that work.

QUALITY STOCKS BELOW FIVE DOLLARS said...

I am not a big fan of short term trading. That does not mean it cannot work for some investors