Outperformance

It looks like the answer to my previous blog is LTG as I see momentum gaining.

The market has been choppy lately. I’ve seen lots of false breakouts left and right. The last one was DNL which I bought on the breakout of 7.20 and just sold when it didn’t move as expected the next day.

Anyway, It’s been a great year so far for me trend following this market.  This month of April is an outlier in my trading performance.  It is way way above my average monthly return.   I’d like to take note of what I did and continue to learn from the market.

  • Trade less.  
  • Focus on relative strength. My amibroker formula that shows me the strongest stock is working for me. If a stock is consistently above 15%-20% RS, there is something in it.
  • Focus on a stock that has HIGH YTD. As a trend follower, you want a stock that has performed and you believe that a stock will continue to outperform.
  • Follow the leader.
  • Follow the leading sector.
  • Avoid the lagging sector even if one of its stock is very strong. (NIKL)
  • When the index is red, use it as an opportunity to confirm the relative strength and confirm if a stock is acting like a real bull leader.
  • Avoid the index stocks. Surely they will provide good returns but they will not let your portfolio OUTPERFORM. Stocks tend to be forced closed up and down. Not healthy for the portfolio, I think.
  • Watch for heavy volume on an up day and low volume on a down day.
  • Trade big when all the trading rules come in alignment and when in a winning streak. Most Specially if you’ve been ahead early in the year.
  • Trade small when in a losing streak.
  • Be fearless. Cut losers fast.
  • Never argue with price action.
  • Get a trading partner. Discuss stocks with a partner who has the same style as yours. You wouldn’t want to hold a stock and show your partner how ugly it looks.
  • Pray to God and trade stocks all for His glory!
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