My fundamental system has been developed over the last 15 years or so. It has been consistently profitable for me, averaging 11.01% annual return over the period 1995-2006
The system was developed using principles established in Jim Slater's book The Zulu Principle, which is now out of print. The follow-up Beyond the Zulu Principle is available from Amazon via the links from the web-site below. You don't need the book to operate my system, but it does contain a lot of background information, and is an interesting read.
My fundamental system uses the following criteria to select a company to invest in.
- The company traded on the London Stock Exchange
- PEG is between 0.3 and 1.0 (PEG is Price/Earnings/Growth rate)
- P/E is between 5 and 20 (P/E is price/earnings ratio)
- Cash flow/share is greater than 1.0 (this is intended to weed out creative accounting)
- Net gearing is less than 50% (I don't like companies with too much debt)
- ROCE is greater than 10 (ROCE is Return on Capital Employed)
- Operating Margin > 10%
- Market capitalisation greater than £20M
- Yield > 1%
- EPS > 0 for each of the last 5 years
- Projected EPS for the next year > 0
- Share price more now than one month ago, and one year ago.
Full details of this system can be found on my web-site Financial Trading and Trend Following
My second system is my trend following system
Trend following is a specific branch of technical analysis. It uses information about a commodities price to predict if the price of the commodity is going to rise or fall. In this context, a commodity could be any of the following:-
- Currencies - Pound, Yen, Euro, Dollar (these are in any combination against each other)
- Metals - Gold, Silver
- Financials - S & P 500, FTSE 100, Nikkei, Hang-Seng
The system could hardly be simpler. A selection is made using the following rules:-
- Go long (buy), the next day as soon as the 50-day simple moving average moves above the 100-day simple moving average.
- Close long, and go short (sell), the next day as soon as the 50-day moving average moves below the 100-day moving average.
- Set a stop-loss of 7% for indexes, 0.005 for currencies
Again full details can be found on my web-site as listed above.
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