# INVESTING-CRITERIA.md — Active Trading System
Last updated: 2026-04-04

## Strategy Overview

**Two-tier approach:**
1. **Index core (90%)** — $6K/month DCA into VDHG, long-term compounding
2. **Active edge** — RSI + technical signals on top 10 ASX/US blue chips + selective spec plays

**Philosophy:** Systematic technical signals on quality stocks = edge. Random speculation = no edge.

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## Tier 1: Blue Chip RSI Trading (Top 10 Market Cap)

### Entry Criteria (ALL must be true)
1. **RSI crosses above 30** (oversold → momentum shift)
2. **Rising volume** on the breakout candle
3. **Price convergence with RSI** (NOT diverging)
4. **Market deceleration/pullback complete** — look for:
   - Higher highs and higher lows
   - Closing price > previous candle high
   - Support/resistance pattern confirmed
5. **No breach of 200-day moving average**

### Universe
- **ASX Top 10 by market cap**: CBA, BHP, CSL, NAB, WBC, ANZ, WES, FMG, RIO, MQG
- **US Top 10 by market cap**: AAPL, MSFT, GOOGL, AMZN, NVDA, META, TSLA, BRK.B, V, JNJ

### Position Sizing
- **Initial entry**: 50% of planned position size
- **Scale in**: Add remaining 50% if price drops after entry (pullback confirmation)
- **Total allocation**: Flexible based on opportunities (currently ~$75K across 8 blue chips)

### Exit Strategy
- **Target**: 20-30% gain (take profits, don't get greedy)
- **Stop loss**: 21% loss or trend line break (whichever comes first)
- **Overbought signal**: Sell when RSI >70 + MACD divergence
- **200MA breach**: Exit immediately

### Technical Setup (IG Platform)
- Entry trend line
- RSI indicator
- Fibonacci retracement levels
- MACD for convergence/divergence
- Support/resistance zones marked

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## Active Holdings (Current Positions from CommSec)

### BLUE CHIP POSITIONS (8 active - Blue rows)

| Ticker | Market Value | Type | Status | Notes |
|---|---|---|---|---|
| META | $15,180 | US Blue Chip | OPEN | Largest position, positive performance |
| NAB | $10,710 | ASX Bank | OPEN | Second largest |
| WBC | $10,080 | ASX Bank | OPEN | Banking sector |
| MPL | $9,450 | ASX Healthcare | OPEN | Medibank |
| TLS | $9,380 | ASX Telco | OPEN | Telstra |
| QAN | $8,640 | ASX Travel | OPEN | Qantas |
| SVR | $6,300 | ASX Tech | OPEN | Silverlake |
| VRL | $5,250 | ASX Media | OPEN | Village Roadshow |

**Blue Chip Subtotal**: $74,990 (8 positions)

### PENNY STOCK POSITIONS (4 active - Orange rows)

| Ticker | Market Value | Thesis | Status | Notes |
|---|---|---|---|---|
| DEV | $11,857 | Proven mgmt, results incoming | OPEN | Largest spec position |
| IBX | $8,857 | Human trials pending | OPEN | High risk/reward |
| LCL | $7,849 | High grades, proven mgmt | OPEN | Mining play |
| ELV | $7,140 | [Need thesis] | OPEN | [Need details] |

**Penny Stock Subtotal**: $35,703 (4 positions)

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## PORTFOLIO SUMMARY

**Total Active Allocation**: $110,693
- Blue Chips: $74,990 (68%)
- Penny Stocks: $35,703 (32%)

**Allocation vs Target**:
- Original target: $30K max active allocation
- Current reality: $111K (3.7× over stated limit)
- As % of $600K investable: 18.4%

**Sector Breakdown (Blue Chips)**:
- Banking: $20,790 (NAB, WBC)
- US Tech: $15,180 (META)
- Telco: $9,380 (TLS)
- Healthcare: $9,450 (MPL)
- Travel: $8,640 (QAN)
- Tech: $6,300 (SVR)
- Media: $5,250 (VRL)

**Benchmark Performance**:
- V line = Vanguard ETF comparison visible in screenshot
- [Need gain/loss % data to compare individual positions vs benchmark]

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## Tier 2: Speculative Plays (Controlled Allocation)

### Spec Play Entry Criteria (ADDITIONAL to blue chip rules)
1. **Hot Copper due diligence**:
   - Read charting posts for technical confirmation
   - Check news ONLY (ignore noise/hype threads)
2. **Director ownership**: Minimum 15% skin in the game (marketindex.com)
3. **Volume confirmation**: 50-100K+ volume, higher buy rate than sell rate
4. **Fundamental check**:
   - Innovative/disruptive business model
   - EPS/sales growth history (last 5 years minimum)
   - PE, D/E, P/B, PEG, FCF, balance ratio — no glaring issues
   - Revenue vs market cap comparable to sector peers
   - **Lewis rule**: Low PE×PB <22.5, high ROIC, high earnings yield
   - **Graham rule**: Trading ≤1.33× tangible asset value
5. **Diversification**: Max 5-6 sectors held at once (no concentration risk)

### Position Sizing (Spec Plays)
- **Emotional check**: Only risk what you're comfortable losing 21-50% of
- **Entry price**: Market price for buys, limit price for sells
- **Stop loss**: 21% loss OR total profit loss per trend line

---

## Daily Maintenance Routine

### Pre-Market (before 10am)
1. **News scan**: CNBC, Financial Review, MarketWatch
   - Look for market-moving events (especially if US down 500-1000 points overnight)
2. **Twitter trader feed**: Key signals/sentiment shifts
3. **Position check**: Any overnight events requiring exit?

### Market Hours
1. **RSI/MACD convergence check** on all positions
2. **MACD verification**: New highs/lows aligned with price?
3. **Candle patterns**: 3 peaks to break resistance, bullish/bearish confirmations
4. **Fibonacci levels**: Are we at support/resistance zones?
5. **Trail stop losses** as positions move in your favor

### Weekly (once per week)
1. **Hot Copper scan**: News-only threads for watchlist stocks
2. **New RSI entries**: Scan top 10 ASX/US for setup signals
3. **Add potential LT trades** to WealthBuddy and Hot Copper watchlists

---

## Monthly Reflection (Mandatory)

### Quantitative
- Record % gains/losses per position
- Compare to S&P 500 benchmark
- Track win rate, average gain, average loss

### Qualitative
- **Mistakes made**: Where did you break the system?
  - Bought on emotion instead of signal?
  - Didn't trail stop loss?
  - Didn't take profits at target level?
  - Chased high RSI instead of waiting for setup?
- **Opportunities missed**: What setups did you see but not act on?

### Resources
- [The Conviction to Hold](https://microcapclub.com/2014/08/the-conviction-to-hold/)
- [Essay on Investing in Small Stocks](https://microcapclub.com/2021/09/an-essay-on-investing-in-small-stocks/)
- [ASX Swing Trade Bot](https://asx.swingtradebot.com)

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## Rules (Non-Negotiable)

1. **Never enter without RSI + volume confirmation** (blue chips)
2. **Never enter spec play without Hot Copper + director ownership check**
3. **Stop loss = sacred** — 21% or trend break, no exceptions
4. **Greed kills** — take 20-30% profits, don't chase 100% gains
5. **Divergence = danger** — if price and RSI diverge, exit or don't enter
6. **200MA breach = exit** — no questions, no waiting
7. **Max 5-6 sectors** for diversification

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## Oliver's Role

### Daily (market open days only)
- Monitor top 10 ASX/US stocks for RSI <30 + rising volume signals
- Flag any positions approaching stop loss or overbought (RSI >70)
- Alert on 200MA breaches
- Check current 12 positions for technical warnings

### On-Demand Only
- Hot Copper DD when Shay is about to open a new position
- Spec play volume/director ownership checks

### Monthly
- Reflection prompt: gains/losses, mistakes, opportunities missed
- Benchmark comparison vs S&P 500 and Vanguard (V line)
- Portfolio diversification check (sector spread)

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## Questions Still Needed

1. **Entry prices** for all 12 positions (to calculate gain/loss %)
2. **ELV thesis** - what's the investment case?
3. **Actual allocation strategy** - is $111K the new normal, or should we work back toward a cap?
4. **Performance vs V line** - which positions are beating/lagging Vanguard benchmark?

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_This is your systematic edge. It's not speculation — it's technical signals + quality filter + strict risk management._