Winston requested me to be interviewed last month, I was reluctant. So maybe I can introduce a bit about myself here. I’m very new to the market, only 1 year + experience. But I am already in love with this game. Hopefully one day I can learn enough skills to trade full time like you guys here.
I have read some books past 1 year. Learned basics of both Technical Analysis (from Daryl Guppy & William O’neil) and Fundamental Analysis (from Mary Buffett & William O’neil). And Jim Rogers has convinced me that the bull is in china for the next 10 to 20 years, so I chose to trade Chinese stocks in HK market.
Here are my current trading strategies and rules.
1) I trade only fundamentally sound stocks (Strong growth or undervalued, and no debt problem). I prefer to pick undervalue stocks when market is in recession and extreme fear like 2008, and growth stock when market normalize like 2009 and now. A nice guide to interpret PE ratios:
0-10: Either the stock is undervalued or the company's earnings are thought to be in decline. Alternatively, current earnings may be substantially above historic trends or the company may have profited from selling assets.
10-17: For many companies a P/E ratio in this range may be considered fair value.
17-25: Either the stock is overvalued or the company's earnings have increased since the last earnings figure was published. The stock may also be a growth stock with earnings expected to increase substantially in future.
25+: A company whose shares have a very high P/E may have high expected future growth in earnings or the stock may be the subject of a speculative bubble.
2) Before I open a trade, the first thing I ask myself is how much money I’m willing to lose on the trade, then I pick a stop loss price, and calculate the position size. I cut loss like cutting vegetable. It’s easy for me because I already know how much I’m willing to lose when the trade don’t go my way.
3) My entries are normally “catching falling knife at support†and “breakoutsâ€, occasionally I do some
“Pyramidâ€
4) I also trade FXP (2x inverse ETF of HK Chinese stocks) to do some hedging when market sentiment is not so good, like now. So I can still hold on to my stocks if they have not hit the stop loss price.
5) Diversify. Maximum position size for 1 stock is 20% of my fund. But I don’t diversify too much until I cannot handle them, so maximum 10 stocks.
I will add more during my learning journey.
Things I yet to learn, “Option strategy†and “Top down, Sector approachâ€
Thanks for reading guys.
