Time-Frame

After managing money for 10+ years I am strongly convinced trading a swing & position time-frame (several days to several months) is best suited for most.

Just like the long-term investing it involves the fear and greed cycles to profit from.

Added benefits are much smaller draw-downs and the fact you don’t have to wait years for the next signal to come.

Shortening your time-frame adds benefits but only to a certain point. Everything below the swing & position time-frame involves much more randomness and is very hard to find an edge in such a noisy environment.

Style 

My approach is top-down. I always start with the overall market analysis and it will determine my level of exposure.

Yes any index is just a sum of individual stocks, but every individual stock is influenced by the index. Reflexivity.

In a bull market my book will swing between neutral and leveraged long. 

In a sideways market it will go from slightly short to full long.

In a bear market it will go from full short to slightly long.

Once I have the exposure level right I want to own only the best stocks/ETFs.

I’ll always do some filtering and than pick technically best setups from the filtered pool of stocks.

Setups fall in 4 basic categories: 1)Big base breakouts, 2) Flags & wedges, 3) Dips within up-trend and 4)Reversals and vice-versa on the short side.

I’ll use options on SPX/SPY and occasionally covered calls and cash secured puts on individual stocks.

One more point: besides the stock universe I’ll pay close attention to ETFs that cover other assets and world markets. The less it correlates to US stock market the better.

Uncorrelated returns are the holy grail of investing! 

 

Framework 

Your talent will never shine unless you frame it properly. It helped me tremendously once I developed a routine.

This is a general guideline that I first intended to publish as a post for new traders:

1. Have a Process

Trading without a process leads to emotions taking over.

Start with any process and improve it over time.

2. Do the Homework

If you don’t do the work in the off hours you have no chance once the market opens.

Trade prepared.

3. Be Patient

Once you know what you are looking for don’t take anything less.

Practicing patience is extremely important and will make a huge difference.

You can choose between thousands of instruments to enter, accept only the best ones.

4. Execute With Confidence

The best plan without the confidence = undersized trades.

Once the trade sets up you must execute timely and in planned size. No excuses.

4. Trade Management: Overcome the Sunk Cost Fallacy

It does not matter what you paid for the stock.

It is irrelevant whether you’re in red or green, all that matters is where the stock is NOW.

Understanding the concept will lead to better trade management (targets and stops).

5. Stay Flexible 

Markets change.

Trading bull and bear markets is very different on several levels.

Trading trending and range bound market is even more different.

Adapt. If something doesn’t work don’t push it.

I have learned it all the hard way. 


D.Zdilar, Investment Banker, London, UK

“I appreciate Ivan’s comments as they are coming from the real experienced no-fluff talking trader, who is walking the talk by backing his words with his own money.”