Brainy's Share Market Toolbox Brainy's
Share Market Toolbox
(public information)

Robert's underlying
philosophy

Nimble short term investing!

When it comes to investing or trading in the share market,
there are many approaches, and many of them are right.

It is most useful to have a clear picture of your own approach before you start.

Robert's underlying philosophy...

If you are in search of an approach, or some guiding principles, to help you with investing or trading, the following key points might help:-
  1. There is some benefit in using Fundamental Analysis — but to a small degree. Some people enjoy performing Fundamental Analysis to a very large degree, and that is okay; but many people might think it is overdone — each to his own.

  2. Technical Analysis should be used to optimise the entry and exit of (share market) investment positions.

  3. Funda-Technical Analysis is a sensible and clever blend of these two analysis approaches.

  4. Have your key trading criteria already recorded (eg. a trading strategy). Consider things like:

  • The amount of total trading capital to “risk” on any one position. A commonly used amount is in the order of 2% to 3% “at risk”.

  • The portion of total trading capital to devote to any one position. One often-used measure is to have no more than 20% of capital tied up in any one position.

  • Determine the exit criteria — it might be a Stop Loss approach, coupled with a Profit Take approach.

  1. One basic approach for stock selection is to look for stocks in a rising trend. Robert uses this approach to identify stocks for his Weekly Watchlist update.

  2. Stocks in a falling trend should not be purchased, and if held, they are candidates for disposal. Of course, stocks in a falling trend could be sold short.

  3. Before entering a position, we should do a couple of things: 

    • Determine the Initial Stop Loss position, then calculate the amount of money at risk.

    • Determine a possible price target, and calculate the amount of possible reward.

    • Calculate the Reward to Risk ratio, and if the value is too low, then skip the stock and look for another.

  1. The position size should be optimised. This will help to reduce the impact of transaction costs like brokerage, slippage, etc.

  2. Stop Loss - If a stock falls below my pre-determined Stop Loss level, then it is sold, in order to minimise losses. Initially this is the initial stop loss, but as time goes by and the stock hopefully rises, this stop loss level is raised and then referred to as the trailing stop.

  3. All of this is much easier, and more enjoyable with good charting software like the Australian BullCharts software package.

Nimble Short Term Investing

As a result of the infamous GFC of 2008-2012(?) it can be seen that
nimble short term investing can be a clever way to go. But how is this different?
(The following is NOT advice! It is just one approach, and one used by some investors.)
  • Look for potential stock purchases on a weekly basis - no need to look daily.
  • Even during bear market periods, some stocks can be in rising trends. So, invest with the trend, looking for a rising Moving Average on weekly charts.
  • During bull market periods, it is easier to be profitable, and the Stop Loss does not have to be too tight - so we could use a volatility-based (eg. ATR) Stop Loss.

Food for thought and more information?

Sensible Investing - ask yourself "does that seem sensible?"
Contrarian Investing Redefined - a revised approach to contrarian investing.
Having trouble getting started? - Are you really Share-Market-Ready?

For more information, see the top of the column at right. 

More Information

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Terminology
Any special terms that might be used in the text at left, can probably be found discussed in the Toolbox somewhere. Perhaps in Brainy's eBook Articles - see the Master Index list for details. Or, search the eBook Articles.

The Share Market - more information about the market and investing and trading.

Brainy's Share Market Toolbox
The toolbox is an arsenal of weapons to help you tackle the share market.
 
See a list of contents on
the Toolbox Gateway page.

Robert Brain provides various support to both new and experienced traders and investors.
Who is Robert Brain?

Beware the sharks in the ocean.
And whatever you do,
beware of the sharks in the ocean!

This is one of the many tools in Brainy's Share Market Toolbox.

The information presented herein represents the opinions of the web page content owner, and
are not recommendations or endorsements of any product, method, strategy, etc.
For financial advice, a professional and licensed financial advisor should be engaged.


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Copyright 2011-2013, R.B.Brain - Consulting (ABN: 52 791 744 975).
Last revised: 21 July, 2013.