As mentioned before, it is based pretty much on the TraderX blog strategy with a few minor adjustments which fit in with my views on trading. So many thanks to TraderX for sharing.
Here are the main components:
- Trade gap stocks (Nasdaq and NYSE) both long and short.
- Mostly (90%) I will trade gap stocks which are trading outside the previous days range.
- Timeframe for trading is 15min charts (first 15min candle defines the "opening range").
- Mostly (90%) I will trade stocks in range $15 to $180 and where volume in first 15min > 120k.
- I use the 5ema,volume and atr as the indicators on my charts.
- Use of price action of the stock as denoted by candlestick behaviour and patterns.
- Use of price action and CCI of the DOW index to judge market direction and attempt to trade in same direction as the general market.
- Trend trades are based on trading pullbacks with narrow range and/or inside bars with the 5ema as support. Ideally with candle price action as supporting factor.
- Breakout Trades are based on breakout of the "opening range" with pattern candle and with market and ema as supporting factors.
- Gap Fade Trades are based on breakout of the "opening range" with pattern candle and with market and ema as suporting factors.
- Breakout and support/resistance trades are based on a breakout coupled with a retest of a significant support/resistance level (e.g OR, previous day's high/low etc).
- Stop is usually opposite end of trigger candle in a lot of cases. In some it will be an alternative support/resistance level.
- The Fib Extension level 1.382 is used to judge potential profitability of a trade. The two points used are [previous day's high and the current day's OR low] for shorts and the opposite for longs.
- Risk a max of 0.5% of capital per trade. Position size based on stop distance.
- Once 1R reached I move stop to breakeven. Depending on market conditions, I may take partial at 1R. I will also tend to take partial at Fib Ext and/or 2R and/or $1 gain.
- I will only ever lose a max of 3R in one day. E.g. If I have 3 trades running and none of them has reached 1R (i.e. to breakeven) then I will not open another trade.