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:
- day price range hit or exceed 1 * Range or 3 * Range.
- wide range bar(WRB) on 3-min chart.
- big volume combined with WRB.
- 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
