Thursday, May 08, 2008

My trading strategy

My trading style and rules have evolved over time, being refined to suit both my temperament and my desire for action. I have a full-time job so it's important that I do not need to be watching the markets throughout the day.

There are basically two types of equity analysis - technical analysis (i.e. the use of charts) and fundamental analysis (looking a financial statements, balance sheets, various ratios, sales forecasts etc). My full time job is in the accountancy profession, so the last thing I want to do is study sets of accounts away from work!!! I therefore use technical analysis as the basis for my trading.

In my opinion, almost all trading is a form of trend following - the only difference is the timeframe people use. Day traders or short-term traders would look for trends on 5 minute charts or 1 hour charts, for example. Extreme long-term traders would use weekly or even monthly chart. I fall in between in using daily charts, and hope to catch trends that may last from several days to (hopefully) six months or more.

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