Trading Rules

As TraderHR's strategy is to capitalize on momentum and continuation patterns in a stock, we use Buy Stop Limit Orders on our long trades, whereby entry points are set above previous day highs (or, in the case of intraday trades, above the intraday highs) and we wait for the stock to come "up" to our buy price as evidence of continued momentum. Limits are set on swing trades to cap the entry level, protecting against extreme opening gaps. Conversely, short trades use Sell Stop Limit Orders, setting entry points below previous day lows.

Entry Points:

Our rules are to enter at the Preferred Entry Price (also known as Buy Stop Price), unless the stock opens above this price but doesn't exceed the Maximum Entry Price (also known as Limit Price), in which case entry is at the Opening Price.

Canceling Trades:

Trades are canceled if the stock opens above the Max Entry Price or below the Stop Loss Price, or if the stock trades below the Stop Loss Price before the Preferred Entry Price is triggered. Trades are also canceled if order not filled by end of first day, as trades only in force for 1 day.

Stops and Targets:

Protect your position with suggested Stop Loss Price, typically 3-5% below Entry Price. All Targets are between 5% and 12% above Entry Price.

Exits:

Open positions are automatically exited at either the specified stop or the specified target.

Number of Shares:

We determine the number of shares for a trade through a formula that ensures that no more than 2% of the account level is risked in a trade. The formula is 2% of the account level divided by the differential between entry price and stop loss price. For example, with a $30,000 account and a trade with a $0.50 differential between entry and stop loss, the number of shares would be 600 (2% of 30,000) divided by 0.50 -- which comes to 1200 shares. If stopped out for a $0.50 loss, the loss is no more than 2% ($600) of account value.

Difference Between Trade Alerts, Charts to Watch, and Free Stock Picks

Trade Alert is our best selection (or two) with the highest probability for a winning trade, with targets mostly 5-12% above entry price. Additional Charts to Watch are other interesting charts found when scanning, but either their risk is a little bit higher or their volume is too low (100k-500k). Free Stock Picks mostly have only entry setup details, and we don't adjust their target or stop loss unless we include them within the Trade of the Day for that day, in which case members receive all instructions from entry to exit (adjusted stops).

Lines on our Charts:

Our charts are delineated by three different colored lines on a chart. The black line is the preferred entry/buy stop point. The red line is the initial stop loss. The blue line is the target -- often we'll have two target areas, the first for taking a profit on part of the position (1/3 to 1/2 of the position) and where to move or begin trailing the stop for the remainder of the position. See example.

More information on our rules is available in Sinisa's article, "Capitalizing on Continuation Patterns."