Master Rider Blog

Automatic Investrading System

August 15th, 2007 NW Teong

I am glad to share with you that I am in the process to automate my investment/trading process. I am doing this by leveraging on widely available information. In short, I am combining my investment valuation model with the live data provided by Singapore Stock Exchange (www.sgx.com).

Once this is completed, my valuation model will get the live feed from the SGX web site, and using my own customized valuation model, I will be alerted on all interesting stocks.  In other words, this system will not only tell me but also alert me (on mere seconds) on stocks with screaming buys, on stocks that just break out of their resistance, on stocks that change trend and hence need to quickly lock in profits (or simply cut loss). I must say that his system coupled with my fundamental analysis would be very versatile. I believe, this will increase the numbers of time we can make money from the market. In short, using this system we can capture more investment opportunities in the market. (If you have read my e-publication, you should be aware that missing money making opportunities is also one type of risk we should minimised!)

Hopefully, once this system is in place, I will be able to share more interesting stocks with all of you! Please take note that even with the system in place; it is always good to continue to conduct the fundamental analysis. We need to understand the companies that we invest, their management, business model, earning prospect etc. This will take times. The advantage of doing this is that, through this process, your horizon will be expanded and in times to come you will be more and more knowledgeable.

My parting shot today is: always remember the essence of stock investment! Wow! I cannot help but feeling very excited about my new project (i.e. to link up SGX data to my valuation spreadsheet). Of course, for those rich ones you can always buy existing software and subscribe to some market data to achieve the same effect. However, I will always advocate that we make full use of information that is available and is free of charge. Besides, I prefer to customize my own model.

Cheers!

p.s. You have to understand that different category of stocks will present different opportunity and different risk and reward profiles. For instance, tech stocks now are cheap (in term of valuation) but need to wait for more evidence of cyclical up swing, construction stocks are now on the up swing (hence can search for some good valuation and good prospect stocks to hold), also there are trading (speculative in nature) stocks which present higher risk and reward profile. Ironically, I am not too interested in big blue chips at this moment as risk and reward profile is not really favourable. They are what I call highly vulnerable to event risk!

My personal view is that we should diversify across the few categories that we like. Hence, you will see that some of your investments are for short term; some are for mid term (e.g. tech stocks). NEVER HOLD STOCKS FOR LONG TERM! (Remember this, in the long run, we are all dead! This is why I said that life is like an option, it has its expiry date). Please also don’t abuse this term. What I hate to see is that investors, before buying stocks have already make up their mind that they are going to hold them for a long time. What happen? They are very likely to use this strategy call buy and forget. While we should allow enough time for our stocks to perform, what we really need to do is monitor our portfolio actively!

Entry Filed under: Stocks