Swing trading pullback method

B

baggerlord

Hi, I'm not sure how many longer term traders there are here, but i wanted to put up a little method I have been working on. I guess it could even be considered position trading. I am going totally off of EOD data because I don't want to have to sit at the computer.

Here are the basics:

conditions for long entry:

1. MACD 26,12,9

MACD and Signal line must both be above 0.

2. Slow stochastic 40,6,6

both K and D must be above or = to 70.

This creates what I think of as the "buy zone".

For entry:

I have a 9 day SMA on the chart. There must be some price action below the SMA, and then a close above it. The action can be an intraday low, or a few days closing behind it. All I need to see is any action.

Entry would be at the open of the next day, assuming there are no crazy gaps or anything. Like I said I want this to all be EOD.

Stop loss would be the recent pivot low.

The main reason I am posting this is that I would like some feedback on exit strategy for the winners. I have a few ideas but I am really struggling with the best method.

I will post a few charts to make sure I have explained properly.
 
Here is what I am currently trying to figure out:

1. A basic filter to get rid of choppy stocks.
2. The best method of exiting winners.

Would love some discussion!
 
Here are my current thoughts:

1. If stock moves the size of the stop loss in my favor, move stop loss to break even.

2. Set a target of 3x initial stop loss

OR

Trail a stop using an MA or pivots or something

I suppose testing would be the best way to figure this out, but the entries are at least partially subjective so this would be difficult.

As far as filtering chop, ADX works pretty well.
 
Quote from baggerlord:

Here is what I am currently trying to figure out:

1. A basic filter to get rid of choppy stocks.
2. The best method of exiting winners.

Would love some discussion!
More...

Hello Baggerlord,

There's not many EOD guys around these parts. Snoop around Chuck LeBeau's site for some ideas on exits. I found a couple there that work very well. (Of course I made them mine with a pinch of this and that.)

http://www.traderclub.com/discus/board.html

Do you have the ability to do some simple backtesting?
 
Quote from baggerlord:

Hi, I'm not sure how many longer term traders there are here, but i wanted to put up a little method I have been working on.
More...

Fine when you have the overall market in a rally, with the wind at your back. But when the market starts its downward leg, you'll get killed buying into what are essentially very minor pullbacks.

For something that approaches profitability in a variety of environments, significantly increase the beta of stocks that generate setups, make sure they have strong fundamentals, and look for weakness of a much greater, and faster magnitude.
 
Quote from lindq:

Fine when you have the overall market in a rally, with the wind at your back. But when the market starts its downward leg, you'll get killed buying into what are essentially very minor pullbacks.

For something that approaches profitability in a variety of environments, significantly increase the beta of stocks that generate setups, make sure they have strong fundamentals, and look for weakness of a much greater, and faster magnitude.
More...

This is a good point. I have filters I use to get rid of noise and stay on the right side of the overall trend, and actually in practice scanning have picked some huge short winners during a little bull market. I was just trying to get some feedback on the actual signal and exit methodology.

Thanks
 
Quote from lindq:

Fine when you have the overall market in a rally, with the wind at your back. But when the market starts its downward leg, you'll get killed buying into what are essentially very minor pullbacks.

For something that approaches profitability in a variety of environments, significantly increase the beta of stocks that generate setups, make sure they have strong fundamentals, and look for weakness of a much greater, and faster magnitude.
More...

I agree :cool:

And would like to add that I divide the trade in to shorter and longer term according to the fundamentals mainly.
The shorter term trades (less fundamental value, lower volume etc') are targeted in percentage (10-15% in stocks for example).
 
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