Do I know how to do technical analysis (TA) as most traders do? You probably already know the answer. Simple: you can hardly find any graphs here.
Do I know how to do fundamental analysis (FA) as most investors do? Sorry to let you down again. Although my FA ability is better than my TA, I am still no professional with no information edge.
Then what is my edge in trading?
I understand the decision making process of most players on the market on a handful stocks I have researched. Most of them are not well known and not commonly traded (unlike AAPL, and GOOG). Despite the players' information access, smartness or whatever edges they have, their actions are driven by human emotions.
Let me give you a few examples:
Hope or Anticipation (DNDN pre-FDA bet, OVTI pre-ER and buyout-rumor run);
Disappointment(no short-term quick money as previous expected in ASPV/SIGA/OVTI despite excellent conference calls and good developments around the corner);
Exhilaration(better than expected good results, such as TSRA/PLXS post-ER movement, or totally unexpected good news, such as MDTL-April-13th)
Relief (worrying about bad news before, but it turned out to be better than previously expected, JRCC post-ER momentum).
My understanding of those emotion cycles and the possible causes behind those movements is my SOLE edge in trading as a retail trader without being an expert on either TA or FA.
My sole purpose of doing retail FA is to locate the largest emotion and sentiment shift. Once it happens, strong price movement momentum will follow. The intensity of such momentums largely depends on the divergence of the actual result and the expected result beforehand.
DNDN's Post-FDA panel result is a wonderful example. When most of players are bearish on the panel recommendation prior to the event, you know what is going to happen after the panel said positive.
You can tell that I am able to find those momentum beforehand or at its very early stage. That's because I understand who the best friend of a trader is. If I can do all the highly accurate momentum predictions as above, you can do the same.
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