ManyPeaks.com

I have seen very limited trading action during the last 3 sessions. Reason being, I have not been feeling in sync with the markets.. nor have I kept very true to my trading strategies.. Thus my confidence has taken a hit.

So, I’m switching gears.

I’ve recently been digging into the programming functionality of my real-time charting software, eSignal.. to put together a more systematic approach for entries and exits. This 30-minute bar chart shows the bars in Blue when the 34-6-3 Stochastic is giving a buy signal, and Red when it’s issuing a sell. After recently allowing those always-dangerous trading emotions to cloud my judgement, I’m anxious to see how it goes “letting the system make the decisions.”

As you can see, a good trade using this system lasts about 10-20 bars long.. there are 13 half hour segments in each trading day. This same strategy can also be applied to 65′ charts (of which there are 6 each day).. or even to Daily charts.. Depending on the type/length of move you’re trying to capture.. And more importantly, the amount of risk you’re willing to take.

For trade candidates, I’m looking for currently volatile stocks, as measured by recent daily ranges (high minus low).. This system gets whipped around by stocks in tight daily ranges.

My play will be to watch for the first Blue bar to form after a string of Reds.. then buy if/when the stock breaks the high of that first blue bar.
- Stop will be placed just under the low of the last Red bar preceding trade entry.
- Take at least 1/3 profits when gains are around 3x the initial risk.. after that, it’s my discretion.
- I’ll be completely out when the first Red bar forms and its low proceeds to be broken.

eSignal has a way to set Alerts for my entry conditions occurring in any stock on my screen.. gotta figure that out tomorrow.

The plan is to use this strategy for a portion of my capital.. to repeadedly catch 2-3 day moves of around 3-6%.. while keeping the risk to 1-2%. I should also be able to effectively play the short side using this system.

I’ll still hold some stocks — selected via a different methodology — for longer time periods. With this system keeping me busy hour-to-hour, I’m hoping the result will be a more hands-off approach to my longer-term positions.

Never underestimate the difficulty traders have simply Doing Nothing!