This simplified presentation of the TraderHR Trading Strategy is created to help retail traders achieve better returns in stock trading by using basic risk management rules. For a deeper understanding of how to properly manage your trades, I suggest my full trading course available HERE. The full trading course consists of 5 video lessons (60 min long) and a 50-page PDF ebook. (discount code: “PREMIUM”).
TraderHR Trading Strategy is a based on breakouts from consolidation periods –- chart patterns. In short, it means that we are focused on stocks with long-term established bullish trends and profit once(if) they broke out of a few day-few week consolidations –- chart patterns such as triangles, flags, pennants, rectangles,…
In the first picture below we can see a hypothetical breakout from an ascending triangle with an example of how entry, stop loss and target levels are chosen. Entry price will be always set above the resistance line which suggests that position will be entered only if the price confirms breakout above the resistance of an established chart pattern. Initial stop loss is set below the most recent low, which is usually between 1%-3% below the entry price. For exits, we use two or three targets. The first target which is set between 1%-4% above the entry price is reserved to exit 25-75% of the initial position, while the rest of the position (25%-50%) is closed at 2nd or 3rd target which is typically set between 4%-15% above the entry-level.
Using multiple exit points allows us to disperse risk during the holding period since not all trades will reach 2nd or 3rd target. Actually, by statistical analysis, of a random 10 trades we can expect between 2-4 trades(real breakouts) that will be able to reach 2nd target and gain more than 5%, the rest 3-4 trades will reach only 1st target and lead to profits from 1%-5%, while 2-3 trades will not reach 1st target and will be stopped out with a small loss of 1-3%. Over the long term, this type of profit distribution between different exit points with proper stop loss adjustments tactics will lead to positive portfolio performance.
When price triggers entry-level and continues to move in the direction of the trade(long or short) it is important to adjust stop-loss every time the price reaches a new high. Thus protecting the position from possible sharp reversal in a case of an unexpected negative event in the market or for the stock we own. The first stop-loss rule is to adjust stop loss from the initial level to break even(entry-level) once the price reaches 1st target and partial profit is taken. After that stop loss should be adjusted every time the price broke above a recent high as presented in Picture 2. below until the price reached 2nd, 3rd target or trigger stop loss.
Detailed analysis of the entire TraderHR Trading Strategy which includes 5 videos (60 min) and PDF ebook (50 pages) can be downloaded from the members’ area.
The full trading course includes the following lessons.
Lesson 1: Trading risks, Investing vs. Trading, Chart analysis, Trend & Consolidation, Statistical analysis, Chart patterns, Bollinger Band, Volume.
Lesson 2: Scanning process, Intraday chart analysis, The importance of stock market trend analysis, Win trade ratio in a different market environment
Lesson 3: Initial trade setup, Entry, stop loss and target levels, Risk management, Events analysis.
Lesson 4: Trade management process, „Up or Out“ strategy, Comfort zone, Trading Flow charts.
Thank You & Good trading!
Sinisa Persic, CMT