Keyword ResearchMarket Analysis and ForecastingAlejandro CarvajalAugust 2012

What we’ll talk about today …

Conclusion

Trend Analysis

Goals

Philosophy

Principals

Purpose

Preface

This presentation is based on the economic theories on trading outlined in the book “Principals of Professional Speculation”

The two main theories presented are:– The Austrian School of Economics (Fundamental)– Dow Theory (Technical)

Preface

Purpose

Provide - Analytical Framework by combining fundamental and technical principals for market analysis and keyword forecasting

Deliver - Improved keyword research and organic search outcomes

Purpose

Goals

Preservation of capital– Produce something (Content)– Risk/Reward analysis

Consistent profitability– Capital management (Preserve gains, minimise losses)– Asset allocation

Pursuit of superior returns– Aggressive risk taking with profits (increase size of position)

Goal Principals

Philosophy

Definition – Particular view of the world that you believe as the truth

Because search is an inexact science and includes measures of subjectivity, each person has their own philosophy on KWR

Philosophy

Principals

Fundamental Principals

Technical Principals

Market Analysis & Forecasting

Purpose of Principals

Principals act as screens for separating the essentials from the irrelevant and making sound marketing analysis and forecasting possible

Fundamental Principals

Universally valid economic theory Analysis of man and his choices/actions due to

conditions of environment

The Austrian School of Economics

“In general movements of the market are the result of fundamental economic forces which in turn are consequences of political actions and decisions”

1. Sperandeo - Trader VIC II – Principals of Professional Speculation

First Guiding Principal

In the middle of the United States, Automobile Industry Recession (2008-2010) an upward trend is seen in “new car” search queries.

CARS Program

“new car” searches

Why?

Obama signs into law the Cars Allowance Rebate System (CARS)

CARS Programme

“In past events we can see what will happen in the future”

1. Sperandeo - Trader VIC II – Principals of Professional Speculation

Second Guiding Principals

“new car” queries peak in

January

“honeymoon” queries also

peak in January

“Recognize the existence of false belief, monitor its progress and act decisively just before everyone else wakes up”

1. Sperandeo - Trader VIC II – Principals of Professional Speculation

Third Guiding Principals

Google Wave

Technical Principals

Dow theory states that there are three trends– Short-term trend (days to weeks)

• Traders | Social Media

– Intermediate-term trend (weeks to months)• Speculators | Events Based (seasonal peaks)

– Long-term trend (month to years)• Investors | Vertical Campaign

What is Dow Theory?

These three trends are in constant movement Vital to understand the nature and direction of the

long-term trend for short and medium-term success. Long-term trend analysis includes– Market Perception (true or not)– Age (extent/duration)– Current Phase

What is Dow Theory?

Trend Analysis

Long-term trend can be defined in four phases– Accumulated (acquired gradually)– Distributed (sold gradually)– Trending Up or Down– Consolidating (taking in a confirmed trend)

If it is not trending it is drawing a line which means it is either accumulating, distributing or consolidating

Four Phases of the Market

Upward trend - movement consisting of higher highs and higher lows

Nature of Upward Trends

HigherHighs

Higher Lows

Downward trend - movement consisting of lower lows and lower highs

Nature of Down Trends

Lower Highs

Lower Lows

1. Movement must cross current trend lineUpward trend – draw line from lowest low to highest minor low preceding highest highDownward trend – draw line from highest high to

lowest minor high preceding lowest low

2. Movement must stop making higher highs (upward trend)or lower lows (downward trend)

Nature of Trend Changes

Choose period for consideration, either long-term, inter-mediate or short-term

Nature of Trend Changes

Period of consideration

Upward trend line

Confirmation of trend change

Trend brakes line

Failure to make Higher highs

Downward trend line

Conclusion

Fundamental analysis - broad view of what is likely to happen

Technical analysis - identify trends and potential for change

Market psychology – recognize trend whose premise is false

Putting it all together

Bet on market cycle expectancy for greater gains. Speculate when high, sell when low.– More traffic when Ranked #1 in seasonal peak for keyword

Make selections that move with general trend but to a greater extend– Be flexible enough to optimise for the inter-mediate trend

cycle Take positions in both the broader market and

individual stocks to limit risk– Optimise for both the short and long tail to limit risk

Building a Strategy