Philosophy

The Thinker

If you are going to use the information in this website, you should understand a little about my trading philosophy. My bias, like most people, is bullish. This is because if you look at a long term (70 year) chart of the stock market the trend is generally UP thanks to our wonderful fractional reserve banking system inducing inflation by currency devaluation. However, there are key moments when it is proper to be short and when this is glaringly obvious I will take short positions.

I tend to keep a limited amount of stocks in play or under watch at any one time. It’s an unfortunate characteristic of our society to always equate more with better. With me this isn’t the case. The only reason to spread out into numerous different stocks is to control risk and I find adequate risk control with 5 positions. I could never understand why some traders take positions on 100s of stocks at any one time.

I also try to retain a healthy “ignorance” when it comes to information. I used to be an information sop but when I took an objective look I found that it was doing more harm than good. You’ve probably heard of the term “analysis paralysis” – well this is what too much information can do. And besides it’s not information that should steer your ship, it’s your SYSTEM. I would suggest that if you haven’t already, you consider going on an information – and disinformation – diet.

The following points sum up my trading SYSTEM at the present moment:

* I am 100% Canuck! I focus on Canadian mid to large cap equities at the present moment, but I also love finding opportunities in Canadian penny stocks, warrants and options when rare opportunities present themselves. I realize there are other great markets in the world but I stick to the Canadian market because I LIVE HERE and am very familiar with it. Plus there is more than enough volatility to make great returns, both long and short.

* I am 95% technical. This works on the assumption that all “fundamental” analysis has already been done by others and shows up in the chart. Using the Stan Weinstein method, I generally respect the 200 day moving averages and let them indicate whether I should be long or short.

* As mentioned above, I use a money management system of 5 “blocks”, roughly of equal size in order to control risk. For liquid stocks, buying is only done with buy stops (I buy on the way up), and selling is only done with sell stops (I sell on the way down). However, for illiquid stocks I unfortunately have to use limit or market orders. My initial sell stops are generally set to 5% to 10% below the initial buy stop. When opportune I reset the sell stop to slightly above the buy stop so that loss is limited. Of course I am looking for breakouts in the 15% to 30% range above the initial buy stop for 3:1 reward:risk setups. This ends up giving me a positive return even if I am wrong 60% of the time!

That’s about it! I constantly tell myself “keep it simple, stupid!”. However my style continues to evolve. You will also have your own style and I encourage you to find it. There is no one way to do this.

If you’re the type that wants to learn more, then check out my “Resources” page and evolve along with me!