Goals, Style and Strategy

Goals

Borrow money from bank at an average interest rate of 5% to speculate for short-term gains.

For stocks, the highest potential returns (and risk) center around growth industries with stock prices that exhibit
high volume,
high volatility and
high price multiples (PE, Price/Sales, Price/Hope).

Style
The expected return is 20% and desired risk and cut loss point is 10%.
If your goal is income and safety, buying or selling at extreme levels (overbought/oversold) is an unlikely style.
My goals center on quick profits, high returns and high risk, bottom picking strategies and gap trading is my style.
My style is aggressive day trading looking to scalp 20% gains to looking to capitalize on medium-term macro economic trends. Combinations including swing traders, position traders, aggressive growth investors, value investors and contrarians. Swing traders might look for 1-5 day trades, position traders for 1-8 week trades and value investors for 1-2 year trades.
Day traders are likely to pursue an aggressive style with high activity levels. The goals would be focused on quick trades, small profits and very tight stop-loss levels. Intraday charts would be used to provide timely entry and exit points. A high level of commitment, focus and energy would be required.

On the other hand, position traders are likely to use daily end-of-day charts and pursue 1-8 week price movements. The goal would be focused on short to intermediate price movements and the level of commitment, while still substantial, would be less than a day trader.

Strategy
Once the goals have been set and preferred style adopted, it is time to develop a strategy. This strategy would be based on your return/risk preferences, trading/investing style and commitment level. Because there are many potential trading and investing strategies, I am going to focus on one hypothetical strategy as an example.

GOAL:
First, the goal would be a 20% return per trade. This is quite high and would involve a correspondingly high level of risk. Because of the associated risk, I would only allot a small percentage (50%) of my portfolio to this strategy. The remaining portion would go towards a more conservative approach.

STYLE:
I like to follow the market throughout the day; I can make the commitment to day trading and use of intraday charts. I would also pursue a position trading style and look for 1-8 week price movements based on end-of-day charts. Indicators will be limited to three with price action (candlesticks) and chart patterns will carry the most influence.
Part of this style would involve a strict money management scheme that would limit losses by imposing a stop-loss immediately after a trade is initiated.
An exit strategy must be in place before the trade is initiated. Should the trade become a winner, the exit strategy would be revised to lock in gains.
The maximum allowed per trade would be 20% of my total trading capital. If my total portfolio were 100,000, then I might allocate 50,000 (50%) to the trading portfolio. Of this 50,000, the maximum allowed per trade would be 10,000 (50,000 * 10%).

STRATEGY: 1. Stop loss at 5 - 10%.2. Take winnings at 10 - 20%3. Top active counters mainly4. Don't hold longer than 1 week (otherwise, it is likely to become an unwanted baby)5. Trust no one but yourself (don't trust gossips)
1. Go long stocks that are near support levels and short stocks near resistance levels. Use Elliott Wave Theory as a reference. To maintain prudence, I would only seek long positions in stocks with weekly (long-term) bull trends and short positions in stocks with weekly (long-term) bear trends.

2. Look for stocks that are starting to show positive (or negative) divergences in key momentum indicators as well as signs of accumulation (or distribution).

3. My indicator arsenal would consist of two momentum indicators (MACD and Slow Stochastic Oscillator) and one volume indicator (Accumulation/Distribution Line). Even though the MACD and the Slow Stochastic Oscillator are momentum oscillators, one is geared towards the direction of momentum MACD and the other towards identifying overbought and oversold levels (Slow Stochastic Oscillator).

4. As triggers, I would use key candlestick patterns, price reversals and gaps to enter a trade.

I pursue an aggressive (high-risk) strategy for trading with a small portion of my portfolio and a relatively conservative (capital preservation) strategy for investing with the bulk of my portfolio.



Attributes of a successful investor
I am sure we all hold different views on what makes an investor successful. After having gone through the ups and downs of investing over the past 20 years, I think some of the key attributes are:1. Foresight. Above everything else, a successful investor must have foresight. He must be able to successfully look into the future and predict correctly.To develop foresight, an investor should have the experience of running successful and not so successful businesses. I think one of the reasons Warren Buffett did so well in his investments is because he had a bad time trying to turn around the original business such that in the end, he sold it. Hence, I see investing as the next step after entrepreneurship. But one needs to be an entrepreneur first to understand the issues that SMEs face in the real world. After all, most of our investments are in real world SME companies and what we are trying to do is to identify the high flyers of the future.
2. Ability to understand the fundamentals behind a company, especially, the financial statements. This is where those trained in accountancy may have an upper hand. However, this attribute is not that difficult to pick up. One of the first stops for any fundamental investor must surely be the annual report. Successful investors have an ability to read in between the lines of a financial statement such that he can foresee many of the issues that may surface in the years ahead. 3. Ability to appreciate technical analysis. This will help time your purchase and sale of shares. 4. Ability to control fear and greed. This one, we all agree and hence, no need for elaboration.