Monday, June 4, 2018

Change of Investing Strategy

As I looked back my trading, they are comprised of primarily the following:
I. Penny stocks speculation
II. Major dividend (5%+) speculation
III. Buyout offer-price spread
IV. Alex Elder’s bullish divergence & impulse system
V. Adam Khoo’s bounce off moving averages
I and II were my initial experimenting which derives mixed results and call for subjective judgement which may be wrong at times, thus I ceased using them several years back.
III was one of my favourite but there isn’t that many buy out offers that presents meaningful spread based on the scenarios thus I also stopped using them.
IV is my most common strategy but with mixed results, honestly, I did not always follow its impulse censorship rules such as buying based on daily signal or wait for weekly impulse to turn blue as I felt price often moved up too fast to have enough risk return ratio based on exponential moving averages. Also using daily MACD-histogram as exit signal which often exited too early or not reliable as MACD-H could fluctuate between red and green.
V was a relatively new strategy that I learned from watching Adam Khoo’s videos. I did a trade and it worked out but felt difficulty to switch my paradigm to that as I was used to MACD & force index; it felt weird just looking at moving averages with stochastics.
I also initially followed his book and used his early fundamentals 9 steps screen but felt too much work and quite impossible to find a great counter with excellent 9 steps scores that meet the technical setup unless a major material development which often throw the entire fundamentals into question and requires quite astute decision and patience for it to work out.

While my greatest returns by % involve some speculation and intra-day penny stocks trades in 2013-2014, but my current work and commitments do not afford me the time to monitor as closely at times.
As for trading, I realised my results are negligible and lacks consistency, winnings often got reduced by big losses, then I struggled to break even.

Thus, moving forward, I decided to spit my war chest $160K into 2 portfolios; $80K of dividend yielding long term holding and $80K for trading at reduced per trade about $20K (instead of current about $30K per trade).
For dividend portfolio, my investing yardsticks would be as follows:
- Established business with consistent earnings of no more than 20% swings from year to year
(cyclical counters like property developers are excluded)
- Established dividend payout track records with foreseeable visibility of maintaining same dividend yield of at least 5%.
- Subject to weekly trading rules such as bearish divergence in weekly indicators / price actions; otherwise counters would be held.
- Possible stop loss of 5% from purchase or 1 ATR down
(to avoid possible fallen angels like Noble and the likes)
Due to the small $80K capital, it would likely be split among 3-4 counters, with an eventual 3 years goal of diversifying into more so that every month or so that could be some payout, and possibly some capital aside for rights issues.

As for my trading portfolio, I would likely keep the per trade amount smaller, praying for wisdom from God that I would judge the setup correctly and avoid disasters and also sticking to trading rules.
Trading strategies that may be deployed:
- Alex Elder’s MACD-H 4 seasons, bullish divergences
- Adam Khoo’s bounce trade and possibly others
- Scenarios based such as buyout-price spread arbitrage and others
To end, I hope to be posting monthly update as journaling would help me to reflect and hopefully avoid or realise earlier if I am fooling myself with certain trades.
Moving forward, I aim to do a monthly portfolio update.
May the trend be with us…

Next blog likely end Jun 18, I will be sharing my first 2 purchases for my dividend portfolio, I bought both towards end May 2018.

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