PocketPAT

+1750 (BILL, FSLY) ::: After 20 months since I’d begun tinkering with the stock market, the strategy is now complete. I’d spent the first nine months following Tim’s patterns. They’d work, but I’d come to realize that their extreme volatility and sporadic nature were simply not for me. I’d watched all 5,000 video lessons at the time, 15+ DVDs, hundreds of YouTube videos and even attended the 2019 Trader & Investor Summit. Sometime between September and November 2019, after nine months of garbage trades and back to back red months, I’d decided to stray off of the beaten path to find what would work for me. I had no idea how long it would take and I certainly wasn’t going to start counting the days, but all I could do was build on the things that made sense along the way. It all started with FNMA. I’d noticed how clean and clear the chart was while Tim Grittani traded it on “Trading Tickers”. It was almost magical compared to the choppy and violent low float/low market cap penny stocks that are typically traded in the chat room. How could I find consistent price-action like FNMA? It slowly became clear that I could only find this with slow-moving Small/Mid (but usually Large) Cap stocks. I now filter my scan to only include tickers trading at least three-million shares per day on average, with market caps above one-billion. I am also targeting tickers between $20 and $100. The price-action gets cleaner and safer as the market cap goes up, but the higher prices are the key to their ultra-clear trends. I suspect that this is due to the lack of penny stock gamblers and beginner traders that would typically either scoff at prices that high or simply find their charts not volatile enough for big profits on small accounts; since the volume isn’t even that busy on one-minute candles, yet the price-action is still so easily trade-able. It almost feels like I’m with a smaller, more exclusive group of traders that are shooting fish in a barrel and clinking beers. SIDENOTE: One thing I’ve always heard is that Large-Cap stocks are “impossible to trade”, because of “all the algorithmic bots” that play emotional games to shake out real traders. Perhaps I have never dealt with this due to my not using Time & Sales or Level 2 and now using wide “Dual-SMAs” for customized entry and exit signals. Any shakeout games are typically caught BETWEEN the two SMAs, leaving my own personal entry/exit signals BEYOND both SMA only (more on that later). Then came a CHANCE discovery of Heikin Ashi candles, while perusing YouTube in bed, around 3am one night. These have “turned on the lights” for me. Suddenly, the crappy and unpredictable candlestick charts that I’d been trained to follow now made perfect sense; providing obvious trends which paired PERFECTLY with the slower-moving stocks that I’d grown to love. After figuring out which stocks to focus on and how to read them, I’d now needed proper entry and exit signals. That’s when the third leg of the journey started: determining which indicators to use. I’d eventually settle on TWO SMA lines, buying and shorting only when the price-action was beyond BOTH. While the first SMA was tight enough to provide early entry and exit signals, the second SMA was wide enough to give sort of a “second opinion” on whether or not the trend had truly changed. Making them both the same color, their constant intertwining keeps the strategy consistent for both long and short plays. While I’ve had to tweak them to find which lengths are best, the most consistently profitable signals seem to come from the 100 and 125 Combo on 1-minute charts. The fourth objective was to create a method for finding the tickers which would give me the most profit potential. These past two weeks, I’d dabbled with using earnings and news as catalysts. While both are effective, the most consistent method for MY strategy has been to simply sort my scanner by the Highest Average Daily Range. The logic here is that it doesn’t matter WHY the stock is moving, but only where from, where to and most importantly: how FAR it consistently goes. Sorting by Highest ADR focuses me on the tickers that have consistently PROVEN to provide ample range for big profits on even small share counts. At that point, I can simply choose the charts with the cleanest and clearest trends, following the Dual SMAs for each run. The last objective was to confirm the safest yet most profitable risk-management strategy. Trading the most volatile slow-movers, I’d needed a stop-out that was both comfortable and wide enough to rarely be triggered. At the same time, I needed a share-count that would still provide enough profits to make the trades worthwhile. I’d gone back and forth between sizing-in twice and sticking to single entries; but struggled with deciding on how many shares to use and at what price range. In the end, I settled on using two single-entry positions of 125 shares with a 1.00 stop-out (on two simultaneous Highest ADR tickers). I’ve found that sticking with this static share-count and price range not only provides me with a consistent flow of clean and clear (yet volatile) tickers, but also allows me to always utilize the exact same risk-management approach for every trade. I can always use the same stop-out and expect the same profits for every dollar-per-share that is earned. Also, using the “Dual-SMA” approach and back-testing on multiple tickers, the 1.00 stop-out is almost never triggered before the SMA reversal; meaning that I’ll typically be exiting the trade on the technical signal before the max loss. At the same time, raising the price range and setting the ADR minimum filter to 3.00+ gives me tickers that consistently provide a 5:1 or even 10:1 risk/reward throughout each day. The key has always been and will continue to be focusing on CLEAN AND CLEAR price-action, with tickers that have consistently flowing all-day runs/cracks. Sometimes the tickers provide a few dollars in each direction or all in a single direction, but the “Dual SMA” system has been guiding my entries and exits in a way that avoids both shakeouts and premature profit-takings. Lastly, after 20 months, I’ve finally reached PDT =) ... While I’d known that it was inevitable, my main goal was to confirm a solid strategy that I’d be prepared to fully exploit once the chains were broken. I’m still waiting for the funds to settle, as I suppose that ETrade wants to make sure that I’m good for the deposit before releasing the PDT count. Though, by next week, I expect to be trading on all cylinders and will continue to use day trades until then. After my account is released into the wild, I’ll finally get back to posting trades with charts for review =) #LongTimeComing

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