Trading Plan

I'm glad I've finally come to this realization that what I've been doing was, to put it lightly, the worst thing I could be doing, trading without a full plan. I knew all along I needed one, but I couldn't develop one that was custom tailored to me. I've developed a plan that I like and it's a very simple system.  I won't know how this will perform so I'll have to stick with it religiously for a few months to see how it's working out but I think it'll do ok.

 

Stock Selection:

Step 1: 9 day EMA must be either heading up to cross the 21 day or have just crossed the 21 day EMA on a 6 month chart in 1 day increments

Step 2: Plot out support and resistance levels on the 6 month chart

Step 3: Stock must be close to support levels and far enough from resistance to potentially make a decent profit

Step 4: If the stock can't make a 3.0 risk/reward, lower percentage of portfolio to use (see Stop Loss) if neither option can work, abandon stock

Step 5: Volume must be increasing over the 200 day EMA as the 9 day EMA is starting to cross the 21 day EMA.

Step 6: If everything checks out start looking for an entry and exit point

 

Entry:

Step 1: Zoom in to a 5 day intra day chart to plot potential support/resistance

Step 2: 9 Day EMA must be close to crossing or has crossed the 21 day EMA.

Step 3: Stock must be close to support and far away enough from resistance to potentially make a 3:1 profit

Step 4: Depending on where the stop is, figure out how many shares to buy

 

Stop Loss:

Step 1: Place stop based on volatility of the stock and support levels on a 3 day chart

Step 2: 2% stop (maximum) use 50% of portfolio

Step 3: 4% stop (maximum) use 25% of portfolio

 

Exit:

Step 1: Zoom in to a 5 day chart and see where the action is in relation to support/resistance

Step 2: When the stock gets close to either 6 month or 3 day resistance, raise stop to a level of profit taking but not enough to get stopped out right away

Step 3: Either get stopped out and move on or let the stock run until I do get stopped out (keep raising stop)

 

 

 

This will be my base plan. I'm sure I'll be fine tuning this over time but this is what I'll be working with.

Related Posts by Categories

Widget by Hoctro | Jack Book