Using What You Know When Making Decisions
How can you determine your trading theme and then figure out what research you need to make your moves? You need to define the long-term secular macroeconomic environment, and in this context, label a dominant trading theme.
You need to define the macroenvironment on a short-term basis, as it evolves on a constant, minute-to-minute basis. If you’re not an investment professional, you need to review the pertinent macroeconomic data and geopolitical developments each morning and evening.
Decide whether the short-term environment fits with, enhances, or supports the current dominant macrotrading theme. Or, do the short-term developments conflict with the dominant theme? Then, consider whether this suggests that the dominant macrotrading theme is intensifying, diminishing, or reversing.
Do the long-term technicals support the dominant macrotheme? If so, do the intermediate term technicals support the long-term technical stance, and does the short-term dynamic support the intermediate-term technical conclusions? If all the macro and technical factors are aligned, then the assumption of capital risk becomes an option, and a trade or investment is warranted.
Next, you need to asses the risk level as it applies to the individual trade or investment as well as the existing risk already present within the overall trading or investing portfolio.
Thereafter, you will be monitoring the position, adjusting the stop on a regular basis as required, ...