Trading
Hi folks! On this page, I will talk about my trading activities and trading style. I use the word “trader” for the lack of a better alternative as I am not a trader in the conventional sense of the word. A trader is supposed to square off his positions at the end of every day, while I hold positions for days and sometimes months.
Micro-proprietary trader
I am a micro-trader since I deal with small sums of money – typically, a few thousand dollars per trade. I use the word “proprietary” since I trade with my own capital on the “buy-side”.
Instruments
I trade primarily on the Indian markets, mostly on the equity space. In other words, I deal mainly with stocks. However, I do occasionally dabble with commodities such as gold.
Style
My trading style is rather unconventional. I do not rely fully on technical analysis or on fundamental analysis, rather using a bit of both. I employ a relative valuation approach. I believe that there is no such thing as a “fair value” for a stock. My belief is that prices move in response to new information that enters the market and that markets tend to over-react to information.
I typically buy on dips(price falls) and sell on rallies(price rises). This strategy works when there is a fair bit of volatility and when the dips in prices are caused by the over-reaction of markets to seemingly negative news. Another, important thing to keep in mind is that this strategy works much better when we are closer to bottom of the business cycle as stocks tend to be cheaper.
I apply this strategy to high – quality blue chip stocks and ETFs (Exchange Traded Funds) that track broad market indices. The reason I choose these instruments is that high-quality stocks and broad market indices are much more likely to rise in price over the long run than penny stocks
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