I still remember the transition when I moved from sell-side to buy-side at the end of 2018.
In the first two years, my approach was almost entirely driven by technical analysis and statistical models. I focused on trend, price action, and significant volume signals to build a systematic strategy for mid-to-long-term equity trading.
The results were strong. The strategy delivered a Sharpe ratio above 2, performing particularly well during the Greater China market downturn from 2018 to 2023.
At that stage, my framework was clear: Let the data speak. Follow the signal.
From Signals to Conviction
However, as I spent more time working in a traditional fundamental fund, I began to see a gap in my approach.
The limitation of a purely technical system is not in identifying opportunities, but in holding conviction, especially in weaker stocks.
This is where qualitative analysis started to matter.
What is the real difference between pure technical analysis and a more qualitative-driven model?
For me, it comes down to one word: Conviction.
Technical signals can tell you when to buy.
But they don’t always give you the confidence to hold when the market moves against you — particularly in stocks that appear “weak” in the short term but may be fundamentally undervalued.
The Influence of Berkshire Hathaway
A turning point for me was reading Berkshire Hathaway Letters to Shareholders.
The insights from Warren Buffett helped refine my thinking and, more importantly, strengthen my framework.
They didn’t replace my existing model. They completed it.
I began to see that beyond financial statements, three elements consistently matter:
Business moat — the durability of competitive advantage
Corporate governance — how decisions are made and risks are managed
People — the quality and integrity of management
These factors are difficult to quantify, but they are critical in building conviction.
Integrating Qualitative Factors
Starting in 2022, I began incorporating these qualitative dimensions into my trading strategy.
Instead of relying solely on signals, I started to:
Allocate exposure to “quality weak stocks”
Identify situations where the market may be underpricing long-term value
Use fundamentals to support and reinforce technical entries
This shift allowed me to move from simply reacting to market signals
to understanding the underlying structure of the investment.
A Broader Investment Framework
In Investing 01 – 05, I’ve shared a general picture of how I think about investing — from systems and signals to structure and conviction.
Starting from Investing 06, I will begin to share my full trading framework in more detail, including my Second Mover Strategy (SMS).
Final Thought
Technical analysis helps you enter the market.
Qualitative analysis helps you stay in the right positions.
In the long run, both matter,
but conviction is what allows a strategy to scale and endure.