What a run with PLUG and ADEP! If I were you, I would have became panic and sold off much earlier. For the past few months, I have been struggling with when to sell and rereading chapter 6 multiple times. Now I use a combination of trendline, previous resistance , swing rule and doubled MA etc to guide me through. Lots to learn.. I would love to do pullback purchase but I am not yet confident of identifying pullback yet and I haven't got time to learn & practice this trick (Same for shorting and continuation buy). That's why I am mostly buying all my positions during breakout point. I try not to overwhelm myself. Thanks for sharing that. Are you buying half position on pullback as described in Stan's book? Now I wish one day I could code a system to identify the stage 2 / continuation breakouts and buy and sell them automatically. That sure beats my ego and weak mind
Nothing showes up on my stage 2 breakout screener - that means fewer stage 2 breakouts. Stay tuned for some analysis on that later this week.
My sellstop screenshot. Note that I am using trader sellstop based on previous swing low. A little reasoning on why the sellstop for REDF: REDF had a huge jump today. Although it had a previous pullback around 2.3, It would be too much risk to set it below 2 than my current sellstop 2.37 ( 35% loss vs 15% to my entry point ). And based on it's last year spike pattern, I will want to cut it quickly if it drops back to it's previous low. In Stan's book, He said to avoid stock that is too far away from the 30 WMA and previous low because of the downside risk. Purchasing REDF is a good example of breaking his rule.. We will see how that pans out
I try to on the Stage 2A breakouts, but it depends on the position size I use, which I determine using the average true range from the last year.
Can you explain how you determine position size? Do you take the size of your account into consideration? I calculate the location of my stop and risk a percentage of my capital.
To calculate the position size I currently use 0.5% of my total account size divided by the 200 day Average True Range of the stock, so for example on the Stage 2A breakout week for SPYR back in May the 200 day ATR was 0.154 and so if you had a account size of say $20,000 then it would be: 100 / 0.154 = 649 shares, so at the price at the time of 3.74 that would have cost $2,427.26 + fees
Any reason you use those numbers? Why not the 20 ma to reflect more recent price moves? Do you also use the ATR to determine your exits?
I'm a position trader and so look for medium to longer term Stage 2 advances and so the 200 day figure works quite for me I've found. But it would make sense for a short term trader to use a smaller figure like a 20 day ATR as that would cover roughly a months worth of trading days, or a 50 day if you swing trade maybe. I use the ATR for lots of things. Grading trades, Position sizing, Targets and Stop Loss for risk reward calculations, as I aim for at least a 3:1 RR ratio. So for example the stop loss is generally around 2 to 3 x the ATR figure, and so I'd be looking for a minimum of 6 to 9 times the ATR figure for the initial target to potentially take some profits. I'm still trying to fine tune how I use it, but basically it gives me a fair way to grade each trade as each trade is judged on how much it has moved after I've bought it compared to it's previous 200 days average true range. So you can judge a trade in large cap stock which might only move a few percent a day with a trade in a micro cap stock that swings around ten or more percent a day, as all that matters is how much it's moved compared to it's own average movement. Hopefully that makes sense.
There doesn't seem to be any definite correlation between the length of time you use for the ma and the size of the ma. I looked at HGT, SYPR & REDF. As the ma increases in size the ATR gets smaller. However the major indexes SPY and DIA the ATR gets bigger as the ma increases QQQ and a few other stocks I looked at there doesnât seem to be any pattern. I would also like to see a 1 to 3 risk to reward ratio. I size my trades somewhat similar to you. I determine where my stop will be based on where there is resistance. I put 0.5% of my capital at risk. The difference between entry and stop divided into my risk gives me my position size. As far as grading trades I use % of capital realized or lost. Then it doesnât make any difference what the price of the stock is that Iâm trading.
PLUG - a previously successful trade for me from earlier in the year looks to be making a potential weekly pullback entry point. Since it went parabolic in February/March it's pulled back 69%, and has spent the last month or so consolidating on lower volume around the still rising 30 week MA. Yesterday it broke out of that small base on 2.4x the average daily volume and closed the day back above the 50 day MA. If you zoom down on the time frames to the 2 hour chart (attached) you'll see it's made a Stage 2A breakout on the 2 hour chart with good potential imo, as the volume increased significantly on the breakout at more than 7x the 2 hour average volume and increased into the close. View attachment 146887 View attachment 146888 View attachment 146889 Finally, I've also attached the monthly chart that shows that the volume has contracted through the pullback phase, and that it's still trading above it's rising 10 & 30 month MAs and so I'm going to look to trade this today depending on how it opens with my stop loss below the recent major swing low at about 3.59 View attachment 146890