Swing trading pullback method ---baggerlord

http://www.elitetrader.com/vb/showthread.php?s=&threadid=91205

04-02-07 05:23 PM
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 26,12,9MACD 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.

Here is why i don't think it can be backtested:

to pick a stock i scan for the conditions i talked about in the first post, and then i sort by highest ADX. I then look through until I find a stock that meets my criteria. My criteria are something like a recent double bottom followed by breakout, or a real nice 3 month trend we are hoping to get a piece of.

I'm not trying to create an automated system, hope I didn't give that impression.

Here is one set of exit criteria I have been playing with.

1. Initial Stop Loss: stock must close below the 18SMA value the day the signal was given, which would be the day before entry. If you could test this vs a real tight stop right below the most recent low that would be cool. I've looked at a couple hundred charts and a looser stop seems to work better.

2. If stock moves in our favor the size of the stop, move it to breakeven. This would be an order we place to trigger at any time during the day. All other trades we wait for close to enter our trades.

3. Let the winners run, using a close below the 18SMA as a signal to exit at open the next day.Reverse it all for the shorts. PS a useful filter to find good stocks is to only look at stocks where 50EMA is greater than 200EMA for longs, reverse for shorts.

Thanks for offering to give this a try!Hope i explained things OK.