What’s your eToro Trading Strategy?

I field this question from time-to-time so I thought I’d create a master copy reply. At the highest level:

1. I mostly trade US tech stocks — I know these companies very well, working with their technology, and generally just interested and curious about them.
2. I hold a few stocks from other geographies and sectors. I particularly like energy companies, I’ve had a natural interest in them for a few years and they have very little correlation with US tech companies. This makes them an effective hedge. They usually do quite well in bull markets too.
3. I keep a small portion of the portfolio invested in cryptos. I am enamoured with blockchain tech, and have mined several cryptos since 2013.

Timing the Market

Here’s the secret to timing the market — you cannot. You’ll get lucky now and again, but quite often you will be unlucky. You can increase your chances of timing the market by knowing your companies well, the way their prices move, and using Technical Analysis but you’ll still be very wrong some of the time.

One of my favourite strategies is to wait for a great stock to take a huge tumble on news — news that doesn’t fundamentally change the company’s long-term ability to excel — and then buy on the way down. Don’t try to time the bottom, break your investment into smaller parts and buy as the price recedes. In the short-term some of your investment might go red, but you’ll average your losses down to a smaller number. Then all you need to do is wait for the recovery!

Factors to Consider when Buying

I use a mixture of sentiment, events and hard facts. It’s difficult to articulate how I combine the data points, but here’s a general guideline.

For a specific stock, crypto, commodity or whatever:

1. Determine if I think that instrument will do excellently over a multi-year period — this is the most important factor
2. Setup alerts so that I instantly receive any really good or bad news concerning the instrument
3. Understand of the “normal” price for that instrument. This isn’t easy to do, and is often based on me staying close to that stock over a long period
4. Perhaps this is a subset of #3, but it’s important to intimately know the recent hsitory of the instrument
5. Learn the sentiment of the industry that instrument belongs to
6. Do some light technical analysis: RSI, fibs, SMAs, EMAs, some candle reading — this is the least important element.

Deciding when to Sell

I like this question, it’s very difficult to answer. My guiding principles are:

1. Don’t put the overall portfolio at risk.
2. Don’t be (too) greedy, leave some for the next man.

There are many factors that I used to determine when to sell:

• How has the portfolio performed recently?
• How has the stock performed recently?
• What is the overall market sentiment at that moment in time?
• Has there recently been big news/Is big news expected soon?
• How much profit (% of position and % of overall portfolio) has the position generated?
• Is there something else that I think can do better than that instrument?
• What is my gut feel?

Over and above all of this my key principle is patience. The market will go against you from time-to-time, but if you’ve bought into companies that you have researched, and they are doing amazing things then it’s just a matter of time before you’re in green again.

Good luck!