Trading Beliefs and Process.

Derek Hernquist, Portfolio Manager, explains his trading beliefs and process in an excellent post titled ‘Process’. You can read it by clicking here.

Derek explains his trading / investing beliefs, thus:

1) Without a marketwide appetite for risk, company signals go mostly unexploited

2) Market moves start inward and spread outward, so studying the “market of stocks” makes more sense to me than studying $SPX

3) Fear(of loss and/or missing out) dominates market activity at the margin, and when enough people are “at the margin” we have a great opportunity to trade

4) I have no way to “outknow” the information on any stock, sector, or asset class; time spent trying is time taken away from honing my true edge

5) Determined trends unfold very deliberately, with regret acting as a powerful catalyst for continuation

6) Distinguishing between a positive feedback loop(trend) and negative feedback loop(range) is the most critical factor in market speculation

He describes his process as ” measure relentlessly and objectively…from 15 minutes to monthly, from balanced to extreme, from expanding to contracting, from high to low, by speed and magnitude, etc. I’m looking for very specific market conditions that, in some timeframe, indicate the presence of a determined trend. I care not only about the % of stocks that are “healthy”, but how that number compares to prior readings. Level, direction, and momentum of these readings are all factors in spotting the right climate for speculation”

Please read his blog post here.

Follow Your Charts

The next meeting of The Association of Technical Analysts, will be held on Saturday, April 13 at New Delhi. Topic is: Derivatives – Synergy with Technical Analysis. IF you live in the NCR, do consider attending. Full details are available here.

The Nifty has been moving around the 5500 – 5550 range for the past five days. I have discussed on TV, the strong support offered by this trading range. There were repeated close below the range, suggesting that the support is not holding. Finally, on Wednesday, April 10, the Nifty made a DOJI, first dipping well below 5500 and then recovering to close at 5550, at the top of the day’s range. In the afternoon, around 5545, I suggested buying the Nifty with a stop below 5500.

The reason for the buy was a favorable risk reward as well as the sign that 5500 is holding inspite of the choppiness that we have seen.

As with all trades, there is no assurance that this one will work out. Our trades work on probability. The outcome of a group of trades is likely to be positive. Results of individual trades, cannot and should not be predicted