Trading methods that suit

A keen trader or investor has to use a method that they understand and that gives them an advantage, an edge – no matter how small.

That method, or way of trading, has to suit the trader’s personality. The technique could be fast-moving, lower time frame, or slow-moving, higher timeframe. Or a combination of both.

Emotionally, the method has to suit too. For example, most traders are comfortable trading relatively large positions on slower moving, higher time frame trades such as daily, weekly or monthly charts; however, are less objective with such trades on lower time frame situations such as intraday (day-trading) opportunities.

Once we sort our emotional tolerance, we then need to consider our ability to manage such trades. Do we have the time and the skills necessary to trade lower time frame situations? Where a trade entry and exit on a ‘swing’ trade can play out in 10 chart bars or less – which on a 2-minute chart is 20 minutes. The same trade using a daily chart would take some two weeks.

I use three clear trading methods with clear time frames. I feel that in each of the methods I have a small edge, and that is vital. The methods are:

  1. 30-year’s investing using detailed fundamental analysis of company figures. I’m primarily looking here at finding a company that is selling at half price or less and one that has been consistently excellent for many years (usually ten years). The company, importantly, needs to be a company that will still be here, and profitable, in 30 years. The calculations took Nick and me over 9-months to develop.
  2. I trade gold, silver, copper, crude oil, treasury bonds and USD/CAD both long and short, and only trade on precise signals. Each trade held for several weeks; this is where I mainly trade the Slow Trader fund. The strategy here is sound, tested and profitable.
  3. Intraday trading of any stock, commodity, index or FX that suits – my favourite is GBP/USD. Skilfully, managerially and emotionally intraday trades are the most difficult. Intraday is also immensely time-consuming and takes many years to become consistently profitable.

You will notice that each method avoids the market crash timeframe of 5 to 15 years. Yes, the 30-year plan will go through a few crashes during its investment period, but over 30 years the crashes provide a ‘dollar-cost-averaging’ opportunity to invest more. The only important crash in the 30-year method that is of concern is the last one. I appreciate that as its 30-years it may not be me making this decision!

Our medium term strategy holds good, for now

Here is a snapshot of our (open) results for the last week. I won’t usually show this detail as it can be misleading when we have a mix of recent and longer-term open trades. But as all our trades have similar creation dates, I felt it was okay to include.

Snip20160401_2

We have a medium-term strategy for these trades. Meaning from 6 to 12 weeks. Part of the plan is to open the trade early. If an early trade is not close enough to the extreme (a top or bottom), then we will manage the trade to achieve better entries. Being early is difficult for many as it is nearly always contrary to popular opinion. Also, being early can provide excellent gains only to see those gains retrace to a loss – which is emotionally challenging and the reason why many traders cash-in too soon.

By early trade, I should mention that we should also not be unreasonably early (it’s never that easy!). Patience is still key. For example, I think, a short in crude oil, currently, is too early. Crude has started to decrease in price this week from a recent up, but to take crude short now is premature. The picture is similar to long-term Treasury bonds that have a potential near-term short opportunity.

My FTSE 350 top buy tips 2015

Nick’s spreadsheet shows us the real value of a company and measures a companies consistency of growth: here are my picks from Nick’s FTSE 350 spreadsheet. These companies show incredible potential future benefits and all with better than 80% consistency of grown.

I would look at buying within the next couple of weeks. You have, coincidently, proper sub-sector diversification here too.

Hargreaves Lansdown PLC, Rotork PLC, Intertek Group PLC, Weir Group PLC, Aggreko PLC, Premier Oil PLC, Playtech PLC, Randgold Resources Ltd, Rightmove PLC, Petrofac Ltd, Fisher (James) and Sons PLC, Aberdeen Asset Management PLC and Nostrum Oil & Gas PLC.

Energy companies, namely crude oil, will have a hesitant start to 2015 but then recover much of recently lost price.

In addition to the above companies, consider a simple index tracker of the FTSE 100, FTSE 250 and S&P 500. They will do well this year. Remember, the secret is attention to cost. Ongoing cost is more important than entry cost. Vanguard FTSE UK Equity Index has an entry of 0.4% of the fund but a low 0.08% current cost. Shop around.

Consider an ETFS Gold (LSE: Epic Bull). Gold will have a good 2015. Based on cycles we could see a gold high near the end of March, then a drop followed by a similar high end of October. For those that bought Centamin PLC look for a sell at one of these dates. Preferably the end of March.

Diversification through Treasury Bonds and Gilts are excellent for the longer term investor. If you don’t have these yet, then leave until next year. It is a fair assumption that interest rates will remain for a while and therefore Treasury Bonds will stay level or decrease slightly this year.

If you hold Domino’s Pizza, Burberry, Easy Jet or Hikma Pharmaceuticals – all previous recommendations – you could consider taking profits now. 

My next blog will be from Nick’s S&P 500 spreadsheet – for those that can invest in US stocks.