Channeling stocks trading rules

Discussion in 'Strategy Building' started by markd01, Jul 14, 2010.

  1. markd01

    markd01

    Any swing traders using channeling stocks out there? What specific trading rules do you use? Please give me your feedback on the below and suggest more that has worked for you.

    SCANNING FOR POTENTIAL PICKS:
    1. Channel at least 10-12%
    2. 90 day volume > 50,000
    3. No earnings (-4 to +30 days)
    4. Recent support (previous support less than 3 months)
    5. Narrow/quick resistence (channel length is less than 30 days)
    6. At least double to triple support
    7. No downside spikers calling for more than 6% stop loss
    8. Watch for other significant resistence on the way to target

    MONEY MANAGEMENT:
    7 positions (14% of trading portfolio)
    Stop loss at 3-7%, average 5% (one position downside risk is 0.71% of portfolio, at extreme if opens 50% lower then 7.1% of the portfolio is at risk) (protect against one bad trade)
    Stop trading rest of the month if down 6-8% (protect against many smaller losses; your trading not in touch with the market)
    Take profit at 8 - 30%, average 10-15%
    Risk to reward ratio has to be at least 1:2, preferrably 1:3 or higher. If stop is at -4%, profit target has to be 8%-12%+
    Move stop losses only in your favor, never make them wider

    ENTRANCE POINT:
    Confirm direction - has to stop downtrending first - same or higher daily lows for past two days and today's open same or higher than yesterday's lows

    GENERAL RULES:
    No impulsive trades
    No doubling down to break even
    Plenty of fish in the sea, after stop loss move on to DIFFERENT stock
    Trade well, not often/always in the market
    Trendlines (support) gets stronger with number of confirmations (want 3 earlier channels established), length (want channel to exist for at least 90 days)
    The greater the volume of trading at support and resistence zone, the stronger it is
    Narrow or fast channels preferred over long or wide. Wide channels that get back to old support are not as valid.
    Few or weak resistence areas on the way to take profit sell target
    Focus on probabilities vs market predictions
    Confirm direction, you don't need absolute bottom and top of a trading range
    Lower priced stocks have higher percentage movements (I only trade $1 - $20)
    Don't enter more than half positions in the same market cycle/time (week) (if market freefalls next day, all positions could break support at same time) (time diversification)
    Trend is your friend - if long term/weekly chart is up go long on daily channel pattern, if weekly chart is down, short half or more positions?
     
    shuraver likes this.