In my previous Blog "Rules of Investment" many have asked me about investing and trading wihout rules because after all rules limit aggression and opportunity. I couldn't agree more with their statement however the earlier blog was in reference to a bearish market sentiment approach and from a traders' view. In those sentiments, I must admit I have NEVER made money trading WITHOUT RULES during bearish sentiment. I suspect one of the real reason being cautious approach by many other players and traders hence the rules keep you a step ahead.

During the bearish sentiment, the investors are the support pillar for the counters and the experience investors will cut loss at a fixed support breached. If the market sentiment and market index has been on a decline, the investors may choose the immediate support breach or before breached as their cut loss strategy. 

Now coming into a bullish market which is essential and needed for a trading beyond rules. One of the key reason to trade this way is the opportunities are higher for the right counter (up to 90%), chances are much better (over 60%) and more players are willing to participate. We have approx 1804 counters currently listed and traded. Traders in a bearish market normally can play up to 15 counters at a time and because it is bearish, the 15 counters can help moderate in this enviroment better. In the recent market sellout by Foreign Investor (~RM197M) i was hit 50% and the other 50% either maintained or higher. When it rebounded, i sold the stronger shares (Yes i sold the stronger shares!!) and bought more into those good shares that have been knocked down during the sellout which i was also holding. Yesterday I have sold majority following my own rules. With that key point, out of the way, in a bullish market where I have mentioned chances are higher of breakouts, opportunities are more, selling in the good counters will lessen and lesser untraded and more fluid movement.

As mentioned there are about 1804 listed counters for trading and during a bullish period, I normally hold 8 counters because 8 is a nice number (just a joke), allows me to consolidate my funds into 8 of the best chosen counters to increase my winnings profits with higher chances.(from 15 counters to 8 counters) Holding at 15 counters I am essentially holding almost 1% of the 1804 counters to spread my risk while 8 reduces it to approx 0.5% with 50% more concentration of funds. 

How and Why?

During a bearish sentiment like now, monitor the ~1804 counters on Gainers, Losers, Unchanged and Untraded to look out for sentiment of the day eg against DJIA, against crude oil...., the participation base on the untraded.  ref to ("Moving the Market at Millenium Speed") for more. I wont mentioned again as already shared. Here mostly traders game.

In a bullish enviroment, the number of Untraded should be very low as the enviroment encourage participation. Gainers and Unchanged should also be much higher vs loser. This is why I said chances are significantly higher when bullish however this is NOT to say that every other counter is a good buy. Imagine on an avg day you are picking the best of 1% of the avg crop and on a good day you are picking 0.5% of the best crop....Essentially what you are picking is Quality right? Picking Quality Stock will likely ensure a higher profit margin over a concentrated plot. So the concentrated plot here is against the amount of funds on a lesser and more quality stock. 

Up to this stage you are wondering how to pick. There are many quality stocks in the market and by quality I mean good companies with good fundamental (FA). Some look for undervalued, while others look at low PE, catalyst, projects secured ...within the good FA stocks. I won't mention the stock here because the good stock selection is very well documented here in the Stock Challenge. If you look at my historical comments, i choose stocks with good TA. This is every bit more essential during bullish times. 

What is a NO GO (avoid) even for Good FA stock!!

1. Those on downtrend channel though supremely undervalued

2. Those with symmetrical triangle formed in their trend chart as this is a 50/50 game

3. Those with poor quarter results. While many look at 2 consecutive Quarters of result to determine, I use a single Quarter for a simple reason. 2 Quarters normally inline with also GDP whereby failing two consecutive Quarters will mean recession. If you cut that step, it means that when anticipating the next quarter result after failing previous quarter results, it will likely to have more dropout (sellers) before the result and lesser who will take the chance. NOT Unless you hv good information of the result which I don't.

4. Avoid those counters with Unsubstantiated rumors unless you are already in it. If you are, and the stock spike upwards in price, SELL and hold your profit.

5. Avoid those without new catalyst 

6. The criteria I am about to mention is really a personal one. Ignore if you dont see in same light. I will avoid those with family run business where owner hold majority shares.

So now that we have a GOOD FA counter and we have scrub the counter of things to avoid, we have ONE more task! 

How to pick the best chance Winner?

1.  On the chart, the trend must be uptrend or ascending triangle or showing rebound sign (with conditions) The conditions being technical price fulfilment as depicted on item 2 must be met, rebound sign or bullish confirmation, high buy rate leading to commitment (ie taking on seller price aggressively) with high volume to meet resistance and/or seller volume build up must be observed.

2.  Here I normally look at 2 Quarters avg price. That would span over 180 days. Using MA price above closest and together with high volume and buy rate . In cases like this I may buy high and sell higher.

3. From global market perspective, it may or may not be bullish doesnt really matter as long as no detrimental news in overall bullish enviroment (such as that which affects global market - interest rate, crude oil) However it is good to note that those such as interest rate by Feds will in time be already factored into the market and is not long term as oppose to dynamicly moving crude oil price because many areas  of adjustment is affected. (ie sector, business, governance, ...)

Lastly if you so decide to follow a final personal rule whether trading or investing, my practice is sell if single day leap of 10-15% in price upwards.

Use this method in Bullish Market or Bullish Sector.