Strategy

Note: This is a draft for purpose of my own record and study. I do not profit from this strategy yet, at least not now. So take this information just for fun.

Once Upon A Dime

I called my trading strategy as “1R/3R Play“. The R refer to average trading range. It’s scalping strategy with counter-trend or reverse setup. It spots a possible pullback or reverse point for an extended trending move, and aims for 10 cents profit. So I gave it another name – “Once Upon A Dime“.

Market — what to buy or sell

I mainly traded NASDAQ stocks which have average daily volume > 800,000, price in range $8 – $80.

1R play: Every night I ran my scanner to find stocks which had larger than usual daily range in past 2 trading sessions and closed in same direction. I look for counter trend entries next day.

For example, stock WXYZ normal trading range is $1.00, but last 2 days the trading range is $1.20 and $1.1, and both days are up days. I am looking for short entry next day.

3R play: It’s a real time scanner which search for stocks whose current trading range larger than 3 times normal trading range.

For example, stock ABCD normal trading rang is $0.80, today it’s falling down and make a new low, the range from low to high is $2.40 or more, I will look for a long entry.

Position Sizing — How much to buy or sell

I am using fixed number of share for each trade. I measure my trading experience in levels against trading profit/loss. And each level has its corresponding shares per trade. Here is my game plan.

There are more advanced position sizing method available. Until I can automated my trades, I will use this simple one.

Entry — When to buy or Sell

I enter a trade when all or 3 of following 4 criteria meet:

1. day price range hit or exceed 1 * Range or 3 * Range.
2. wide range bar(WRB) on 3-min chart.
3. big volume combined with WRB.
4. oversold/overbought on slow stochastic indicator.

The entry price is same as trailing stop order on previous 3-min bar’s high or low. If I am going short, the entry price is previous low. See Wide Range Bar(WRB) to guide trade entry for some explanation.

Occasionally if I see 3 consecutive WRB, I will entry the trade in next bar.

Stops — When to get out of a losing position

The stop price is placed 2-5 cents away from recent high or low.

If price does not reach first profit target in 10 minutes, get out.
Exits — When to get out of a winning position

The initial target is 10 cents for first half position. Next half is trailed.

Normally exit position in 15 minutes.

Tactics — How to buy or sell

I am using 3-minute chart to read the market. And using limit order for entry and exits. Most time I use mental stop (not working well so far, should use hard stop).

Trading Examples

AVCT – 3R play

MPEL – 1R Play