Investment Strategies

Stratosfi gives you the data, tools, and analysis you need to apply different investment strategies — from short-term technical trading to long-term fundamental investing. This guide covers the core concepts and shows you how to put them into practice on the platform.

Technical vs. Fundamental Analysis

There are two major schools of thought when it comes to evaluating investments. Most successful traders use a combination of both.

Technical Analysis

Technical analysis focuses on price action and patterns. It assumes that all known information is already reflected in the price, and that historical patterns tend to repeat.

When to use it:

• Short-term trading (day trading, swing trading)
• Timing entries and exits on positions you already want to take
• Identifying trend reversals and momentum shifts
• Setting stop-loss and take-profit levels

Stratosfi tools for technical analysis:

• Charts & Indicators — candlesticks, RSI, MACD, VWAP, SMA, EMA, Bollinger Bands
• Stock Screener — filter by RSI, SMA crossovers, 52-week highs/lows
• Correlation Matrix — see how assets move relative to each other
• Heatmap — spot sectors with momentum at a glance

Fundamental Analysis

Fundamental analysis focuses on financial health and intrinsic value. It looks at revenue, earnings, debt, management quality, and competitive position to determine whether a stock is fairly priced.

When to use it:

• Long-term investing (months to years)
• Evaluating whether a stock is overvalued or undervalued
• Comparing companies within the same industry
• Building a portfolio based on quality and growth

Stratosfi tools for fundamental analysis:

• Financials — income statements, balance sheets, cash flow
• Peer Comparison — side-by-side metrics against competitors
• Company Explorer — map supply chains, subsidiaries, and partnerships
• AI Analysis — ask the AI to evaluate valuation, compare P/E ratios, or explain earnings
• Analyst Ratings — consensus price targets and buy/sell recommendations
• ESG Dashboard — environmental, social, and governance scores

Combining Both

The strongest approach is to use fundamental analysis to decide what to buy and technical analysis to decide when to buy it. For example:

1. Use the Screener to find stocks with low P/E ratios and strong earnings growth (fundamental).
2. Open the Chart and wait for RSI to drop below 30 or for the price to bounce off a support level (technical).
3. Use AI Chat to get a quick summary of the company's recent news and outlook.
4. Enter the trade with a clear plan for your target and stop-loss.

How to Read Candlestick Patterns

Candlestick charts are the foundation of technical analysis. Beyond the basics of open, high, low, and close (covered in Charts & Indicators), specific candlestick patterns can signal reversals or continuations.

Reversal Patterns

These patterns suggest the current trend may be about to change direction.

Doji

A Doji forms when the open and close are nearly identical, creating a cross or plus shape. It signals indecision — neither buyers nor sellers are in control.

• After an uptrend: May signal a reversal downward
• After a downtrend: May signal a reversal upward
• On its own: Not a strong signal. Look for confirmation from the next candle.

Hammer

A Hammer has a small body at the top and a long lower wick (at least twice the body length). It appears at the bottom of a downtrend.

• The long lower wick means sellers pushed the price down, but buyers fought back and closed near the open.
• Bullish signal — the downtrend may be ending.
• Confirmation: the next candle should close above the Hammer's body.

Inverted Hammer

The mirror image of a Hammer — small body at the bottom with a long upper wick. Also appears at the bottom of a downtrend.

• Buyers tried to push higher during the period. Even though they could not hold the gains, it signals buying interest is emerging.
• Less reliable than a regular Hammer. Wait for confirmation.

Engulfing Patterns

An Engulfing pattern is a two-candle pattern where the second candle's body completely engulfs the first candle's body.

• Bullish Engulfing: A small red candle followed by a larger green candle. Signals a potential bottom.
• Bearish Engulfing: A small green candle followed by a larger red candle. Signals a potential top.
• The larger the engulfing candle relative to the first, the stronger the signal.

Morning Star / Evening Star

A three-candle pattern:

• Morning Star (bullish): Large red candle, small-bodied candle (star), large green candle. Signals a bottom.
• Evening Star (bearish): Large green candle, small-bodied candle, large red candle. Signals a top.

Continuation Patterns

These patterns suggest the current trend will likely continue.

Three White Soldiers / Three Black Crows

• Three White Soldiers: Three consecutive green candles with higher closes, each opening within the previous body. Strong bullish continuation.
• Three Black Crows: Three consecutive red candles with lower closes. Strong bearish continuation.

Rising / Falling Three Methods

A five-candle pattern: one large candle in the trend direction, followed by three small counter-trend candles, then another large candle in the original direction. The trend is pausing, not reversing.

Reading Patterns on Stratosfi

1. Open a Chart and set the timeframe that matches your trading horizon (daily for swing trading, weekly for long-term).
2. Look for patterns at key levels — support, resistance, or moving averages.
3. Use indicators for confirmation: a Bullish Engulfing pattern with RSI below 30 is a stronger signal than the pattern alone.
4. Ask the AI: "What candlestick patterns do you see on AAPL's daily chart?" for a second opinion.

Using the Screener to Find Opportunities

The Stock Screener is your starting point for finding stocks that match specific criteria. Here are practical screening strategies.

Value Investing Screen

Find stocks that may be trading below their intrinsic value:

Filter	Setting
P/E Ratio	Below 15
Market Cap	Above $2 billion
Dividend Yield	Above 2%
EPS	Positive

This finds profitable, established companies trading at reasonable valuations with income.

Momentum Screen

Find stocks with strong upward momentum:

Filter	Setting
Change %	Above 5% today
Volume	Above 2x average
RSI	Between 50 and 70
Trend	Uptrend

This finds stocks breaking out on high volume with room to run before becoming overbought.

Oversold Bounce Screen

Find stocks that may be due for a recovery:

Filter	Setting
RSI	Below 30
Market Cap	Above $10 billion
52-Week High/Low	Within 20% of 52-week low

Large-cap stocks with RSI below 30 often bounce. The large market cap filter avoids small companies that might be cheap for a good reason.

Dividend Income Screen

Find reliable income-generating stocks:

Filter	Setting
Dividend Yield	Above 3%
Market Cap	Above $5 billion
P/E Ratio	Below 25
Sector	Utilities, REITs, Consumer Staples

From Screen to Action

Once the screener returns results:

1. Sort by the column most important to your strategy.
2. Click on the top candidates to open their charts.
3. Check the AI Insights for each — sentiment, technical summary, and key risks.
4. Add promising stocks to your Watchlist for monitoring.
5. Use the Company Explorer to understand their competitive position and supply chain.

Portfolio Diversification

Diversification means spreading your investments across different assets so that a loss in one position does not devastate your entire portfolio. Stratosfi provides several tools to help you diversify effectively.

Diversify Across Sectors

Avoid putting all your money in one industry. If technology stocks drop 20%, a concentrated tech portfolio drops 20%. A diversified portfolio across technology, healthcare, financials, energy, and consumer staples absorbs the shock better.

Use the Sector Performance view and the Heatmap to see which sectors are leading and lagging. In your Portfolio, check your Sector Exposure chart to identify over-concentration.

Diversify Across Asset Classes

Go beyond stocks:

Asset Class	Behavior	Stratosfi Coverage
Stocks	Growth, dividends	Full coverage — US equities, global indices
Crypto	High growth, high volatility	Crypto Markets, DeFi Dashboard, Funding Rates
Fixed Income	Stability, income	Fixed Income view, yield curve data
Forex	Currency exposure	FX Dashboard
Options	Hedging, leverage	Options Chain with Greeks

Use Correlation to Your Advantage

The Correlation Matrix shows how different assets move relative to each other:

• Correlation near +1.0: Assets move together. Owning both does not add diversification.
• Correlation near 0: Assets move independently. Good for diversification.
• Correlation near -1.0: Assets move in opposite directions. Excellent for hedging.

Practical example: If your portfolio is heavy in tech stocks, the Correlation Matrix might show that utility stocks or gold have low or negative correlation with tech. Adding those positions would reduce your overall portfolio volatility.

Geographic Diversification

Use the World Indices view to track international markets. Diversifying across regions (US, Europe, Asia, emerging markets) reduces exposure to any single economy.

Risk Management Basics

Even the best analysis fails sometimes. Risk management ensures that inevitable losses do not wipe out your gains.

Position Sizing: The 2% Rule

Never risk more than 2% of your total portfolio on a single trade. This means the maximum amount you can lose if the trade goes against you (not the position size itself) should be 2% or less.

Example: Portfolio value is $100,000. Maximum risk per trade is $2,000.

If you buy a stock at $50 and set a stop-loss at $48 (risk of $2 per share), you can buy up to 1,000 shares ($2,000 / $2 = 1,000 shares). The position size is $50,000, but the risk is only $2,000.

Stop-Loss Concepts

A stop-loss is a price level at which you exit a losing trade to prevent further loss.

How to set a stop-loss:

• Technical level: Place it below a support level, below the most recent swing low, or below a key moving average.
• Percentage-based: Set it at a fixed percentage below your entry (e.g., 5-10% for swing trades).
• ATR-based: Use the Average True Range to set a stop based on the stock's normal volatility. A stop at 2x ATR below entry gives the stock room to fluctuate without stopping you out on noise.

Common mistakes:

• Setting stops too tight — normal volatility triggers the stop and you exit a winning trade too early.
• Not using stops at all — a small loss turns into a catastrophic one.
• Moving stops further away when a trade goes against you — this defeats the purpose.

Risk-Reward Ratio

Before entering any trade, calculate the ratio between your potential profit and your potential loss:

• Target price: $60 (potential gain of $10 per share)
• Stop-loss: $48 (potential loss of $2 per share)
• Risk-reward ratio: 5:1 (you stand to gain $10 for every $2 you risk)

A common guideline is to only take trades with a risk-reward ratio of at least 2:1. The Screener and Chart tools help you identify levels for targets and stops.

Portfolio-Level Risk

Beyond individual trades, monitor your overall portfolio risk:

• Concentration: The Portfolio view shows what percentage each position represents. No single stock should dominate.
• Beta: A portfolio beta above 1.0 means you are more volatile than the market. Check this in Portfolio Analytics.
• Correlation: Use the Correlation Matrix to ensure your positions are not all moving in lockstep.

Using Stratosfi for Risk Management

1. Portfolio tab — check concentration and sector exposure weekly.
2. Portfolio Analytics — review beta, drawdown, and performance attribution.
3. Portfolio Risk — stress tests and Value at Risk (VaR) analysis.
4. Alerts — set price alerts near your stop-loss levels so you are notified before they trigger.
5. AI Chat — ask "Is my portfolio too concentrated in tech?" or "What is my portfolio's risk profile?"

Putting It All Together

Strategy	Analysis Type	Key Tools	Time Horizon
Day Trading	Technical	Charts, VWAP, Movers, Level 2	Minutes to hours
Swing Trading	Technical + Fundamental	Charts, Screener, RSI, AI Chat	Days to weeks
Value Investing	Fundamental	Screener, Financials, P/E, AI Analysis	Months to years
Income Investing	Fundamental	Screener (dividends), Fixed Income	Years
Growth Investing	Fundamental + Technical	Screener, Earnings Calendar, AI Insights	Months to years
Crypto Trading	Technical	Crypto Markets, Funding Rates, Sentiment	Hours to days
Macro Trading	Fundamental	Econ Dashboard, Central Bank Monitor, FX	Weeks to months

Related Features

• Charts & Indicators — technical analysis tools
• Stock Screener — find stocks matching your criteria
• AI Analysis — AI-powered stock analysis and insights
• Trading — paper trading, portfolio, and risk metrics
• Options Chain — options analysis with Greeks
• Custom Dashboards — build strategy-specific views
• Company Explorer — map company relationships