My trading system. Any advice?

[fonsi141]

Hi. I would like your opinions on my trading system and how I can improve it. I am limited to stocks that have had a breakout and I enter short position. I would like to expand my options but these really seem to be the way to go for me. This method has worked out to be profitable. I am a teenager and open to any suggestions. Thanks

 

[malaguti]

Hi. I would like your opinions on my trading system and how I can improve it. I am limited to stocks that have had a breakout and I enter short position. I would like to expand my options but these really seem to be the way to go for me. This method has worked out to be profitable. I am a teenager and open to any suggestions. Thanks

the most obvious way to expand your options would be one which follows the trend. The breakout at circa $4.30 on your chart (coinciding with the inverse head and shoulders) would have been the most natural entry long for me. I've only ever found consistency when i am with the trend rather than against it.

 

[Splitlink]

Hi. I would like your opinions on my trading system and how I can improve it. I am limited to stocks that have had a breakout and I enter short position. I would like to expand my options but these really seem to be the way to go for me. This method has worked out to be profitable. I am a teenager and open to any suggestions. Thanks

I do not wish to enter into the reasons that you have chosen to short this chart because I have learned, to my own cost, how wrong I can be!

I do believe, though, that I would have adopted a long position on this one. Indicators can be deceptive. Sometimes they do not reverse, even though they look overbought. They can stay up there. You have an example of that at the extreme left of your chart.

 

[Lee Shepherd]

Hi. I would like your opinions on my trading system and how I can improve it. I am limited to stocks that have had a breakout and I enter short position. I would like to expand my options but these really seem to be the way to go for me. This method has worked out to be profitable. I am a teenager and open to any suggestions. Thanks

Hi fonsi,

Interesting that you say on your chart that the price usually moves within the MA and that the price would eventually bounce back or drop.

This is only true when it is range bound, obviously, that's how they work in the first place.

How would you deal with, for example:

The drop in mid October when the price did not bounce back?
and
The rise in Mid April when the price did not drop back?

Obviously this is only a small section of data but still if not traded correctly, the MA would simply screw you over.
I'm picking on this as its what you have mainly highlighted on the charts and therefore I am picking up and commenting on your highlight. Although you have mentioned some other instruments, you are looking to short on the basis as you mention:

Lower buying volume over 4 consecutive days - Could be caused by consolidation and conviction in price
Stochastic indicating overbought - Would be caused by a rapid rise - Consolidation would neutralize this as so would a moving average (MA)
(Past) performance of MA envelopes - Only good in range bound markets

If I take out the presumptions of the right hand side of the chart, I would question what is the difference between the now and Jan bull spike (outside MA) and March bear spike (outside MA). I would then go as far as asking about the fundamentals of the said stock but that's a bit too much work for me if i'm not looking any further.

NB: I can only comment on what you have given me in your post.

ALSO NOTE: I am not saying this stock is going one way or the other, I am merely stating what I see. I would also rise caution to Pharmaceutical stocks, typically these can be extremely volatile unexpectedly as if they pass a drug through a single phase can make the stock price rally exponentially, on the flip side if it fails can cause massive damage to the confidence of holders, again affecting the price in a negative manor.

If you want to get a handle on the fundamentals (ie, the backbone) then feel free to read the link from their SEC filing. The link is their most recent and was filed for the fiscal year end December 31st 2012: (received 3rd March 2013)

BIODELIVERY SCIENCES INTERNATIONAL INC (Form: 10-K, Received: 03/18/2013 16:21:23)

Reading such information can take a short time if one knows what they are looking out for. This in itself is a bit of an art. Needless to say, what would be the difference in buying the company outright risking many millions or buying a small hold worth a few hundred or thousand?

The question is, if I am investing less should I do less work on my research???? Bear that in mind and it will hold you in good stead for the future.

Have a good week.

Lee Shepherd

 

[fonsi141]

Thanks for all the advice. I will try to trade different patterns and rethink my trades. But am a swing trader and seek to gain 3%-6% on each trade after 1-5 days. I don't trade on the long term I look for small short-term profits.

 

[malaguti]

Thanks for all the advice. I will try to trade different patterns and rethink my trades. But am a swing trader and seek to gain 3%-6% on each trade after 1-5 days. I don't trade on the long term I look for small short-term profits.

mixing things isnt a bad idea, should one system not generate returns, then possibly another will. As for trading in the short term, thats fine too, so long as your initial risk is also between 3 and 6% and your strategy is better than 50:50
one question though, why decide that you will only trade short term? If you were trading long, and a new trend develops you could be missing out on significant gains.
Consider an exit strategy that could maximise your potential gains. Just a thought

 

[krylite]

It looks like you're going short trying to catch a pullback. This is probably the most riskiest type of trade trying to go countertrend scalping/reversion to the mean on a current trend long.

I would only go short if price dipped below the low of the spike bar and would take profit much earlier; who knows if it will actually reach 5.03; by the time price reaches your upper MA whether by dipping or consolidating, that point will probably be higher than 5.03 Your other criteria may be ok but this is going be a really short trade requiring nimbleness and a tight stop.

Then as others have said look for a good long trend catching trade after the pullback. I know that's vague but you can probably figure it out with being creative and testing with your criteria. And it's much easier to take a relative short scalp profit on a good with trend entry. Not sure why you say you are "limited" to only short countertrend trades on stocks that breakout. Usually stocks that breakout can go much higher.

 

[fonsi141]

Thanks for the feedback