PSEi: Golden Cross vs the Death cross

As a trend follower, I mainly rely on moving averages to identify trends in stocks. Reasonably, I'm also using the same tool in assessing the general market's trend. One traditional moving average signal that I'm using to identify longer time-frame trend of the PSEi is the 50 and 200 simple moving averages crossover.

A GOLDEN  CROSS (50 sma crossing above 200 sma) indicates a long-term bull market going forward, while a DEATH CROSS (50 sma crossing below 200 sma) signals a long-term bear market. Either cross may occur as a signal of a trend change, but they more frequently occur as a strong indication of a reversal that has already taken place. I use this moving averages to decide whether I should have some position or not, as well as determining the percentage I'm willing to risk in every trade. Mix in volume and you'll have a simple but very reliable signal to use. As always, for me price and volume is king, the rest are just noise. A simple tool to clearly see the market's direction (up, down, or sideways).

Notes: 
I'm only in the market right after the GOLDEN CROSS. 
I trade normally when prices above 50 sma. 
I lessen risk tolerance when prices go below 50 SMA.
I go all cash and wait in the sidelines when DEATH CROSS happens.

This strategy has saved my portfolio from big losses during big market dips. Additionally, on  long up trends I can confidently let my profits run as long as my moving averages are pointing up. Take note though that I only use this to assess the general market's trend.

Post #51: PSEi update

PSEI 5 year weekly chart by www.Bigcharts.Marketwatch.com

The Philippine stock exchange index (PSEi) seems to be displaying a corrective wave in its downtrend. I will still remain cautious and will not enter in any position. Although some bounce plays are possible in this scenario, it is something that I don't intend to take anymore. I am in the opinion that the downtrend is still intact and the possibility of downward continuation is highly possible.

I'm still sticking to my plan of not trading a generally bearish market. I am willing to wait for the market to tell me when it's time to go back again. There is no rush to make money in my part; I consider trading as a long game and I'm planning to stick around as long as I can. I believe the key to longevity and winning in this game is risk management.

I will be just watching the market until my signal tells me it's time to take some position. I might even end the year without entering any position. I'm sticking to my guns.

Post #49: My trading system flowchart

Lately, I am making an effort to make my trading as systematic as possible.  My goal is to set definite trading rules that will eliminate any second-guessing and emotions in my executions. Below is an overview of what I am currently doing.  I decided to show it in a flowchart form.

The very first step is to asses the general market's trend. This is where I will decide whether the market situation is favorable or not. It is also where I decide if how much of my capital will be put into position and how much will stay liquid. For example, in a down-trending market I might want to be only 25% in position and stay 75% in liquid cash.

Stock selection is where I decide what criteria will be factored in before a stock enter my watch-list. I am using both technical and fundamental factors. For example, I like stocks that are showing tight volatility ranges with increasing volumes. Fundamental factors includes P/E ratios, float % and many others.

Specific entry criteria is where I intend to enter a position. One example is a good upside breakout of a tight ranging stock with above average volume. I am looking for various set ups and I'm using a specific entry point strategy to avoid confusion in my execution.

Risk management is where I set up entry stops, position sizing, trailing stops and my risk tolerance. This is where I also scale my position up to avoid getting hurt in whipsaws. I believe this is one of the most important process that traders should focus.

Selling is where I set specific rules on when to sell my positions. Example of this is when the price hit my trailing stop or when the price is showing some topping signs.

Last, but also the most important part of my system, is the feedback and trading review part.This is where I review my trades to see if there's any part of the system that needs to be revised for improvement. No system is perfect, that's why constant feedback is important.

That's how simple my system will be. Although revision is expected, I will try to always keep it as simple as i intended it to be. There is no need for an over-complicated system, but at the same time you also need specific rules and system if you want to be successful in this endeavor. Otherwise, your trading will be driven by your emotions and it will become just some random buy and sell transactions without any clear justification.

Post #47: End of May 2018 numbers

This is a bitter pill to swallow, but I have to accept that this kind of market is not really my forte. I'm down -10% YTD and in my opinion is experiencing a really bad drawdown. I'm focusing all my efforts now on risk management and keeping may capital safe.

With PSEi ranging between 7600 - 7800, I'm still very wary of putting a big chunk of my portfolio in positions. My risk management involves smaller sizing, smaller risk tolerance and tighter stops. I am hoping to see a clearer market trend when the index gets out of this 7600-7800 range, hopefully with an upward bias. Otherwise, for me it is either play tight defense or get out of the marekt entirely.