Thursday, April 11, 2013

Trading Beliefs and Process

Derek Hernquist, Portfolio Manager, explains his trading beliefs and process in an excellent post titled 'Process'. You can read it by clicking here.

Derek explains his trading / investing beliefs, thus:

1) Without a marketwide appetite for risk, company signals go mostly unexploited

2) Market moves start inward and spread outward, so studying the “market of stocks” makes more sense to me than studying $SPX

3) Fear(of loss and/or missing out) dominates market activity at the margin, and when enough people are “at the margin” we have a great opportunity to trade

4) I have no way to “outknow” the information on any stock, sector, or asset class; time spent trying is time taken away from honing my true edge

5) Determined trends unfold very deliberately, with regret acting as a powerful catalyst for continuation

6) Distinguishing between a positive feedback loop(trend) and negative feedback loop(range) is the most critical factor in market speculation

He describes his process as " measure relentlessly and objectively…from 15 minutes to monthly, from balanced to extreme, from expanding to contracting, from high to low, by speed and magnitude, etc. I’m looking for very specific market conditions that, in some timeframe, indicate the presence of a determined trend. I care not only about the % of stocks that are “healthy”, but how that number compares to prior readings. Level, direction, and momentum of these readings are all factors in spotting the right climate for speculation"

Please read his blog post here.


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