Recommended strategy

Your strategy

You need to find a trading strategy that suits you, one that minimises your risks and optimises your returns. This strategy should designed based on your risk tolerance, personality and portfolio. Choosing an appropriate strategy is crucial for a winning outcome.

Our forecasts

We provide you with market forecasts that are displayed in easy-to-read tables, along with ‘signal indicators’. Each signal reflects how we expect the market to move – either up or down – within specific periods. 

Read this page thoroughly, choose a strategy that suits your portfolio and personality – act wisely and be patient.

General advice

Before you start trading, we recommend that you follow our forecasts and familiarise yourself with them 1-2 months. Get to know your market, your favorite stocks, and especially how our forecasts are correlated to reality and important upcoming macro events.

As with any forecast the latest one is always the most accurate, therefore you should always rely on the latest one. If the forecast is rapidly changing, change your position and wait out the turbulent and volatile periods caused by macro events. Be aware of market reactions as the forecasts may not cover violent changes. Be patient and stop trading on a specific instrument the day before a report release for at least for a week. Monitor events that are related to your specific instrument, or the macro events, that caused a certain market movement.

Trade with even greater caution if going against the general trend. For example, if a report provides unexpected numbers, and causes the value of an instrument to fall, do not buy as the generated signal may be falsely triggered as a reaction to the fall.

Once you feel confident with our forecasts, buy when there is a clear signal (usually greater than 2). Buy either bull – or bear certificates, depending on the direction of the signal. E.g. if the signal is -2 (red), you should buy bear certificates while if the signal is 2 you should invest in bull certificates.

Enter the market when the signal shows a clear rise. Our forecasts distinguish between noise and important individual events, so it is crucial that you possess some basic knowledge of the economical ongoing events. Most often that not, it is unwise to trade contrary to the general direction of the market.

Remember: our forecasts are a complementary tool (perhaps the most powerful one) in your investment arsenal – base each trading decision on a well thought-out comprehensive strategy. You are ultimately responsible for your trading decisions and outcomes.

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Search for treasures

Scan through alfazen’s forecasts and extract those instruments that are forecast to increase or decrease with a value greater than 2. Look at corresponding stock-charts to check if the trigger is based on a reaction to a report or any other macro event. Make an analysis of the instrument using your favorite method(s) as a double-check. Visually analyse the chart. Buy (bull- or bear) if our forecasts “make sense” – they usually do.

Do NOT buy if there has recently been a major move in the instrument as the signal may be falsely triggered.

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Diversify your portfolio

Diversify in at least two dimensions: branch and bull/bear. Keep your portfolio balanced with regards to various markets to minimise your risks. You never know how a particular market may perform. Keep your portfolio balanced in terms of weight of bull positions vs bear positions. E.g. if there is an uptrend market, then it is wise to be more weighted towards the bull side.

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Selling strategy

Just as important as knowing when to buy is knowing when to sell. With this is mind, we recommend the following strategies:

  • Sell as soon as your goal is reached (usually 3-5% return on investment) within the time frame chosen
  • Sell when the time frame chosen is reached, irrespective of the outcome
  • In both cases, we recommend using a stop-loss which should be placed at a price level equal to or moderately less than your goal.

How we manage our own portfolio:

We love trading but we don’t have much time to do so during the day. Depending on our personalities, we tend to prioritise differently. A typical example of the time horizon distribution of  our trades is 60:20:20 for the short, medium and long terms.

Our portfolio is diversified across different (and uncorrelated) segments, typically banking/finance, technology, minerals and pharma.

When alfazen gives a positive or negative signal, we perform a manual check of the plausibility of the signal. If the signal intuitively makes sense – and it is not a reaction to a report, macro event or other external shock – then we either buy bull or bear certificates for that instrument (we favour products that have x3 leverage).

Our initial stop-loss is 2-3% depending on the volatility (ATR – Average True Ratio) of the last period and our risk/position never exceeds 1% of our initial portfolio value.

We never bet on the outcome of an event. We avoid taking positions before any major events like a Federal Reserve or OPEC meeting.

We sell if:

  • the preset stop-loss has been activated
  • the instrument changes by 5% in our favour
  • the last prediction date is reached

Based on these simple rules, between June 2015 and June 2016, our trades have yielded, on average 37% gains, 22% losses and the rest (40%) draws in our trades on the basis of 5-7 trades per day.