We all know a 100% win rate is not sustainable. This post is an excuse to commit some trading rules to writing and to brag.
Swing Trading Powered By Chaikin Analytics (Bullish)
Set Up and Watchlist Criteria
- Market Conditions: market up or market neutral positive potential preferred
- Uptrending industry group an sector
- Underlying stock or ETF checking the usual Chaikin boxes
- Price rising above uptrending long term Chaikin moving average, Neutral+ rating at a minimum, though prefer Very Bullish/Bullish Power Gauges, along with positive, persistent money flow and relative strength
- OB/OS oscillator oversold
- No earnings next two weeks
- Price less than 10% higher than Chaikin long-term trendline.
- Stock makes one of the following technical moves: cross above or bounce at 21 EMA, OB/OS oscillator curls up in oversold, market forecast gives "buy the dip" or intermediate trend confirmation signal, support bounce: close is above high of low candle of pullback, bullish candlestick pattern - engulfing, inside day, island reversal, morning star, hammer or inverted hammer, piercing line, etc.
- Purchases (We are tracking return only, not position sizing or managing portfolio)
- 1 share
- 1 ITM call near 70 delta approximately 2 - 6 months out from expiration
- Verticals, covered calls diagonals, butterflies etc require different trading plan
- Risk reward is a critical calculation for swing trading, because we expect more net losing trades resulting from this strategy.
- Calculate distance between entry price and 1.5 ATR 21 EMA stop. That's the the theoretical risk.
- Calculate the entry price and the projected position of the upper volatility band. This is the theoretical reward.
- We prefer trades with a reward to risk value of grater than 2.
- Exiting when OBOS oscillator reaches overbought may be a risk to this strategy since it cuts of trades that might otherwise reach the upper volatility band. However, we don't know if the act of exiting early increases our winning incidence rate. That's why we're testing.
- Set alert for stock falling below the 1.5 ATR band below Chaikin short term trendline Use Keltner Channels set to 1.5 ATR of 21 Day EMA. This is our line in the sand. Exit if line is crossed.
- Trail kelter channel based stop loss
- Exit if the OB/OS oscillator rolls over before getting to overbought.
- Rating turns bearish.
Management/Exit for a Likely Winner
- Exit if price becomes overbought or touches outer volatility band, whichever happens first. (Alternative: price becomes overbought and oscillator curls to the downside OR price touches outer volatility band, whichever comes first.
- Before earnings announcement
- Adjust Keltner Channel based exit, check for earnings announcement and all potential exit criteria
- Log all results. Consider tracking specific entry and exit criteria so rules can be improved.