Creating a Strategy

The goal is not to be in the market 24/7, trade daily, or even be right 100% of the time. While we want to make consistent returns on our trades over time, remember that the most important factor is minimizing losses.  As we learned in Risk:Reward, we can be wrong most of the time and still be profitable.

• • 2:1 - 33% Win Rate (33 wins and 66 losses)

  • 3:1 - 25% Win Rate (25 wins and 75 losses)

  • 4:1 - 20% Win Rate (20 wins and 80 losses)

Our goal is to be consistent and finding the spots that give us the best possible chance of succeeding. We take profits, protect our positions, and cut losses quick (defined risk).  We want to be as mechanical as possible when determining our entries, exits, take profit areas, stop losses, and additions to our positions.  

"You're not trying to be the first one on board; rather, you're looking for where momentum is picking up and risk of failure is relatively low" ~ Minervini (Trade Like a Stock Market Wizard)

21MA Strategy

• • Look for an up trending 21MA, price to close near and above 21MA, you can look for a confirmation candle (second candle) to confirm the uptrend or to look for previous resistance being broken

  • Hold as long as price stays above the 21MA

  • Consider your stock and how overextended a stock will get from the 21MA before a pullback

  • Hard exit on a candle close below the 21MA 

• Can be used on  any time frame, but larger time frames give better pivots

• Similar to the above strategies, but is looking at larger trend moves

• Suggestion for exit:

  • Look for a double bottom and retest

  • Take profits at previous high or keep a tighter stop near the previous high

  • Do not let it come back down for a head and shoulders pattern to break

  • You can always reenter if it continues up

DISCLAIMER:

• First and foremost, we do not need to trade daily

• We want to find the best positions that offer us at least a 3:1 Risk:Reward ratio, defined and minimized risk, and the best entries and exits.

• If the ratio does not work or if we miss the entry we will pass to find the next entry or another setup.

• When we find larger moves based on the Daily or higher time frames, this can enable us several opportunities to profit from the move in our desired direction.