My new strategy: Entry, Exit, Position Sizing

This is a discussion on My new strategy: Entry, Exit, Position Sizing within the Swing & Position Trading forums, part of the Methods category; Pedro, Ok sensei, before I run my revised strategy by you, just want to make one thing clear. A daily ...

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Old Jun 29, 2009, 4:15pm   #9
 
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typhoon1983 started this thread Pedro,

Ok sensei, before I run my revised strategy by you, just want to make one thing clear. A daily chart is 1 candlestick = 1 day? So if I have a months chart on there, I could set intervals to daily and that would be a daily chart with like 20 trading days right? That was what I meant the first time I said 1 to 2 month chart. If I'm still not getting it, let me know. And without further ado....


My First Strategy (revised):

I can only trade stocks and NO shorting

Starting account value: $20,000 USD

Entry: Buy after 2 or 3 day correction of an uptrend. Enter a few ticks above yesterdays high.

Indicators: (pick two indicators that apply) on a daily candlestick chart....

1. DMI: (pick one that applies)

a. DI+ "crosses" DI- on upside
b. ADX is on top, DI+ in the middle, DI- on bottom
c. DI+ "crosses" 25 on upside


2. RSI [Under 35]

3. MACD: (pick two that apply)

a. MACD "and" EMA is above '0' zero
b. MACD "crosses" EMA on the upside
c. MACD "moves away from" EMA on the upside


Exit on lossing trade: Stop loss at last swing low or last pullback's low.

Exit on winning trade: Dollar amount gains between...

(1.5 x Risk per trade) and (3 x Risk per trade) or the start of the next pullback.

Position Sizing: Risk per trade/(Entry price - Stop loss price)


Is this a solid, system? If I stay true and consistent to it, I'd probably make a profit right? If there's anything that needs to be changed or it's just a bad, system, feel free to punch me in the face and correct me.

Last edited by typhoon1983; Jun 29, 2009 at 4:30pm.
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Old Jun 30, 2009, 12:13am   #10
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Originally Posted by typhoon1983 View Post
Pedro,

Ok sensei, before I run my revised strategy by you, just want to make one thing clear. A daily chart is 1 candlestick = 1 day? So if I have a months chart on there, I could set intervals to daily and that would be a daily chart with like 20 trading days right? That was what I meant the first time I said 1 to 2 month chart. If I'm still not getting it, let me know. And without further ado....


My First Strategy (revised):

I can only trade stocks and NO shorting

Starting account value: $20,000 USD

Entry: Buy after 2 or 3 day correction of an uptrend. Enter a few ticks above yesterdays high.

Indicators: (pick two indicators that apply) on a daily candlestick chart....

1. DMI: (pick one that applies)

a. DI+ "crosses" DI- on upside
b. ADX is on top, DI+ in the middle, DI- on bottom
c. DI+ "crosses" 25 on upside


2. RSI [Under 35]

3. MACD: (pick two that apply)

a. MACD "and" EMA is above '0' zero
b. MACD "crosses" EMA on the upside
c. MACD "moves away from" EMA on the upside


Exit on lossing trade: Stop loss at last swing low or last pullback's low.

Exit on winning trade: Dollar amount gains between...

(1.5 x Risk per trade) and (3 x Risk per trade) or the start of the next pullback.

Position Sizing: Risk per trade/(Entry price - Stop loss price)


Is this a solid, system? If I stay true and consistent to it, I'd probably make a profit right? If there's anything that needs to be changed or it's just a bad, system, feel free to punch me in the face and correct me.
Get yourself a paper trading platform & trade it.
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Old Jun 30, 2009, 6:48am   #11
 
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Joined Jan 2008
SB is illegal in the US.

Obviously its considered more dangerous than carrying guns around

But in a way it makes sense though... imagine all these punters losing on a leveraged product.. getting pissed... and having access to guns!

The situation is bad as it is... good thought by the authorities!

However... do you guys think if someone opened a SB shop called "Aim&Shoot Spreads" or "Spreadshooting"
it would get a license to operate?
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Old Jul 4, 2009, 6:38pm   #12
 
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Originally Posted by typhoon1983 View Post
This is my first post on T2W and I'm also a beginner trader. I am not able to short sell because my account has only 20,000 and TDAmeritrade won't let me short, daytrade, or trade options until I have margin... which will be when I have 25,000 in my account. So here's my strategy with what I got.

My First Strategy:

I can only trade stocks and NO shorting (which is a pain in ars)

Starting account value: $20,000 USD

Entry: 2 or 3 days down (in a row) where the closing price is lower than the opening price.

Indicators: (pick two that apply) on a month or 2 month candlestick chart....

1. DMI [ADX is on top, DI+ in the middle, DI- on bottom]

2. RSI [Under 35]

3. MACD: (pick two that apply)

a. MACD "and" EMA is above '0' zero
b. MACD "crosses" EMA on the upside
c. MACD "moves away from" EMA on the upside


Exit:

Stop loss at 1% of "total account value"
Limit sell order at 3% gain of "total account value"

OR

Stop loss at 4% of "security value"
Limit sell order at 10% "security value"

Position Sizing: Between 20% - 25% of total account value

So as you can see, I don't have much to work with but I really need to start making profits in order to start selling short. If anybody has any suggestions or comments, all are welcome. Thanks.

-Dan
The only way to know whether to trade that strategy is to back test it on the equities you are planning to trade. You also need objective rules about the "pick two that apply" part.
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Old Jul 6, 2009, 11:56am   #13
Joined Jan 2009
You should consider looking at Average True Range for placing the stop. Try to place your stop beyond the noise of the market, e.g. 2 ATR. That way you won't get stopped if your position call turns out to be right. As for taking profit, I prefer to target a point of 2-3 times my initial stop distance, but backtest this to get a better idea of this ratio. I have tested and experimented with fancy trailing stop algorithms, but don't find any outsized benefit.

I would steer clear of partial take profits if the position moves in the money - this is the quickest way to minimize your profits, whilst ensuring your losses are nearly always on the full original stake.
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Thanks! The following members like this post: pedro01
Old Jul 16, 2009, 12:50am   #14
 
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Joined Jun 2009
Dont limit yourself to just ameritrade, although I have no complaints about apex. If you really want to use margin, and do not have 25k, try opening a zecco account, as they will allow you to margin with only 2k. Although, I would not reccommend you starting out your new career as a short selling enthusiast, merely due to the fact that you can lose 200% of your account holdings.
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Old Jul 27, 2009, 11:01pm   #15
Joined Mar 2007
Perhaps you need to read a couple of books? "A beginners guide to day trading online" by Toni Turner is a great basic introduction and easy to understand. You'll find a lot of things explained clearly and simply. And it's like less than $10 on Amazon. p.s. read it at least three times and you'll find three books in one - great value for money

Last edited by Neoripley; Jul 27, 2009 at 11:30pm.
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Old Aug 5, 2009, 3:00am   #16
 
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typhoon1983 started this thread Thanks for all the feedback ya'll. I'll consider all your inputs.

Neo,

It's funny you should mention Toni Turner's "A beginners guide to day trading online." I went to a used book store looking for Steve Nison's books and left with this instead not knowing what it was.

I actually posted this thread before I read Stan Weinstein's book and I'm trying to use his strategy now. Tell me if this is a good new strategy...

My Second Strategy:

Picking stocks: i go through all the sectors and pick a few that are in strong uptrends or are in a level 1 basing with potential to breakout. then i go through the few sectors that i picked and put all potentially strong stocks on my watchlist w/ alerts to tell me when to get in.

Entry:

1. entry either on breakout or on confirmation of support within the trading range. (i heard it's easier to play a stock before the breakout and sell a part of the position near the resisitance)

2. after the breakout, entry on a pullback towards the previous resistance AFTER signs of strength

3. fast MA crosses over slow MA or signs of strength after confirmation of MA support (got that from toni turner)

Position sizing: still haven't mastered this part yet. i guess i'll stick to pedro's method of

Risk per trade/(Entry price - Stop loss price)

Exit: Stan Weinstein's method of putting a stop loss at below last swing low or support... then, if it goes up, move my stop loss to below new last swing low or support after a pullback.

the only thing about that exit is that i hate waiting through pullbacks. can't stand seeing my money fade. also, anybody ever hear the expression from investors "never seen a rich technical analyst." that ain't true right? i mean, i know there's no buffett of technical analysis, but there's gotta be some guys that made a billion dollars being technical.

what do you guys think?
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