Momentum Trading Plan

EDIT: I've developed a new trading plan that I've been following since Early January, 2008.

Check it out here: http://tradeswing.blogspot.com/2008/01/trading-plan-residual-morning-momentum.html

 

 

I've been doing a lot of thinking and going over my past winners and comparing them to my recent losers to see if I can spot some differences and then to eliminate those differences.

 

The loser I had today was moving on weak volume. It had momentum but the volume wasn't there to back it up and sustain the move. I'm going to use this post to write out in detail exactly what it is I'm looking for. I'm going to print this out and lay it on my keyboard and every time I come to my PC to trade, I'll see the plan, read it and keep a fresh image of exactly what it is I'm looking for.

 

Selection Criteria for Winning Candidate:

1) Momentum has to be in a steady up trend. Nothing moving straight up and not dead slow either.

2) The 10 EMA (red line) for intra day volume has to be increasing and showing moderate to heavy white volume. Volume will confirm whether the momentum is good or not.

3) Price action of the stock must be in an up trend, confirming the volume backed behind the increase.

4) Ideally, the stock should be going against the overall trend and should be obvious that the stock is taking off whether the market is up or down.

5) The wicks on the candles should be very small and/or almost non existent. Do not trade long wicked candle patterns. Pattern should be tight and concise.

 

Entry:

1) If above criteria has been met then don't hesitate to buy at market value.

 

Exit:

1) Stop will be placed in a spot below entry that's not too far away but not too close so that I'll be stopped out immediately. This will completely discretionary. Risk will always be 0.5% of total equity unless a 2.5% draw down has been reached, at that point risk will be cut to 0.25%

2) When a 2% increase has been reached from the point of entry, stop will be raised to break even. The selling of 50% of shares at this 2% increase will be mandatory.

3) When the 2% mark has been passed and the price action is still increasing, the stop will be trailed continuously until stopped out. Once the stop has been increased, it won't be lowered for anything.

Related Posts by Categories

Widget by Hoctro | Jack Book