Updated Trading Strategy - Y-Swing 2.5

This updated strategy mainly fix the risk issues towards Stop orders, which are now variable within a range, as well as the timing. Please note that this posts may seem a bit clustered, and not very clear in some parts, and I will work on doing a clearer and more simple version of it. I felt it was important to post this soon, despite being a draft, to explain how my trading strategy has evolved.

Y-SWING 2.5 Trading Strategy:

STEP 1 Determine the total value of your portfolio

STEP 2 Determine the maximum number of stocks you can hold in your portfolio
Note 1: If you have: less than $5000 = 2 stocks; $5001-$10000= 3 stocks; $10001-$25000= 4 stocks; $25000-$50000= 5 stocks; $50000-$100000= 6 stocks; >$100000= 6 stocks.
Note 2: If the total value of your portfolio is of $5000, you should have up to $2500 invested per stock ($5000/2=$2500 per stock); $20000 ($20000/4=$5000 per stock), and so on.

STEP 3 Buy stock ABC with 50.00% of cash, for your intended maximum position
Note 1: If the total value of your portfolio is $5000, meaning that you may hold up to 2 stocks with a maximum of $2500 for each stock, start by investing $1250.00 to open your position on your first stock. For example if the share price of stock ABC is $10.00, buy 125 shares @ $10.00= $1250.00.
Note 2: When your stock's share price fluctuates between -6.99% & +2.99% for 28 days (20 business days), you should sell the stock no matter what the price and move on to another (Unless you strongly believe that the stock is about to make its move and move in the direction you desire, whether you are long or short)

STEP 4 Set, up to a -7.00% Stop Loss order based on technical analysis SELL SIGNAL
Note 1: Make sure to select a stock with not too much downside. This means that you should be able to catch a trend early on. Look for stocks with more potential to rise, and try to buy near strong support levels once it bounces back up. For example: if you buy stock ABC at $11.00, after seeing it bounce back up strong support at its 50 day MA at $10.50, you should set a Stop loss order sharply below $10.50, around maybe $10.35 (-5.90%) - to get a clear SELL SIGNAL. Your stop loss order may vary but should never be over -7.00% of your entry point. If there isn't strong enough support within -7.00% of your entry point, you would have to take on a higher possible loss (more risk), and probably have more potential down side than upside; Also you may possibly get whipsawed. If your stop loss gets triggered, take your loss and move on to another stock.

STEP 5 Set a Stop BUY order at a level for which you would get a BUY SIGNAL based on technical analysis (Note that you may not always have to set a BUY STOP order if the nexy BUY SIGNAL is not clearly identified yet) (timing optional) (use 32.50% of your remaining cash for that stock, or next addition to your current position)
Note 1: When you enter into a long position with 50.00% cash of your max intended position, you may set a stop buy order if you see any breaks above resistance levels currently in sight. You may however, prefer to set market or limit orders, live, rather than having triggers, if you happen to regularly follow your stock and perhaps make a more thought out decision then. Keep in mind that even if you set a BUY Stop order, nothing prevents you to cancel or modify it as you get new technical signals that may indicate new developments. You may also prefer to set Stop Buy orders, when the current price is near a BUY SIGNAL, which could possibly be confirmed.

If you have $2500 as a maximum intended position, and have already invested $1250, you should add $2500x0.325= $812.50/$10.30 =78.88 ~ 79 shares ($813.70). You would now hold a total 204 shares, for a total of $2063.70. The purpose of doing this (averaging up) is if the stock's share price starts moving your way it will be safer to add more money to your position and reap in more gains, while limiting your losses if you were to immediately invest all your intended position for that stock at once. If you were to invest everything at once you wouldn't give yourself the chance of being wrong, and despite having a -7.00% stop loss order, you would still lose more money.

Note 2: The risk when this order gets filled is to see your stock pullback below -7.00% before you get the chance to place a new stop loss order, in case you are not present when the order gets filled. This could and should only happen if you invest in very volatile stock, and is therefore better to set it manually if you invest in such stocks.

STEP 6 Review your Old Stop Loss order and decide if you should set a New Stop Loss order for all your shares based on technical Sell Signals at up to -7.00% of your average purchased prices.
Note 1:Your average purchased price can easily be calculated: If your first trade represented an investment of $1250 for 125 shares, and your 2nd trade $813.70 for 79 shares. Simply do the sum of your investments and divide it by your total number of shares ($1250+$813.70= $2063.70; 125+79= 204 shares) $2063.70/204= $10.116 average purchase price. Now that you have your average purchased price, simply do $10.116-7.00%= $9.407 stop loss order.

STEP 7 Set a Stop BUY order at a level for which you would get a BUY SIGNAL based on technical analysis (Note that you may not always have to set a BUY STOP order if the nexy BUY SIGNAL is not clearly identified yet) (timing optional) (use the remaining 17.50% of your cash for that stock, or next addition to your current position)
Note 1: Still using our last example, your last purchase price would be $10.30. Therefore you would set a stop buy order at $10.30+3.00%= $10.609 with $2500x0.175= $437.50 for 41.23 shares~ 41 shares x $10.609= $434.969. You would now have a total of 204+41= 245 shares for $2498.669 ($434.969+$2063.70).

STEP 8 Review your Old Stop Loss order and decide if you should set a New Stop Loss order for all your shares based on technical Sell Signals at up to -7.00% of your average purchased prices.
Note 1: Your average purchased price would now be $10.198=($2498.669/245). Your new stop loss order $10.198-7.00%= $9.484.

STEP 9 Set -7.00% VTSO (Virtual Trailing Stop Order), the moment you are up +8.00%
Note 1: The moment your stock increases +8.00% over your average purchased price, you may want to set an average -7.00% VTSO (based on the average purchased price -7.00%, and the current price -7.00%). You will now be guaranteed to exit your position without any losses. Another thing you could do is set a VTSO that corresponds to sell signals. This could be appropriate in the event where your stock is trading within a very strong narrow uptrend
Note 2: Withdraw 50.00% of your gains, while maintaining a minimum set total balance for your portfolio.

STEP 10 (optional) Cancel VTSO and Sell portion of shares representing gain
Note 1: The moment you have a gain of +20.00%, you may consider selling the portion of shares representing that +20.00% gain. You may choose to start selling before or after you achieve a +20.00% gain, it's up to you. You may want to wait for any signs of weakness before selling a portion of your shares.
Note 2: Withdraw 50.00% of your gains, while maintaining a minimum set total balance for your portfolio.

STEP 11 (optional) Set new VTSO for remaining shares
Note 1: For your remaining shares set an average -7.00% VTSO,based on the average initial purchased price -7.00%, and your last sell point -7.00% (Step 4).
Note 2: Withdraw 50.00% of your gains, while maintaining a minimum set total balance for your portfolio.

STEP 12 (optional) Repeat Steps 10 & 11
Note 1: Withdraw 50.00% of your gains, while maintaining a minimum set total balance for your portfolio.

If you have a more or less risk tolerance you can adjust your stop loss to your liking. What is extremely hard when you start trading, it's the inability to take losses, and set your stops in advance. When I first started trying to apply this strategy, I found myself either canceling my stop orders before they would get triggered or wait till it hit my stop loss target and tell myself I would just place a market sell order then. It took me about 2-3 years to be able to accept the fact that I had to take some losses. The most successful traders have more losing trades than winners. The reason is because, those traders cut and limit their losses while when they start making gains they try to ride those trends as long as possible and will make huge gains. If out of 3 trades, 2 represent losses of -7.00% each, while your winner made you 40.00%, you are profitable, and that's the goal of this strategy. Most people will hold on to losses and hope they bounce back, while they quickly sell their winners because they're scared of losing it when they have it. Think of it like this, if you are making gains it means that you are doing something right, and probably made the right call, and you should hold on to it as long as you can or as trend persists. The beauty of this strategy, is that even if you're not good at picking stocks, by limiting your losses, the chances are that you may be profitable in the end. You may get frustrated, if you get stopped out several times consecutively. If this occurs, you should set back and stop trading for a little while, and try to figure what is it that you're doing wrong.

With this strategy, each stock you buy should be from a unique sector.Some people may argue, that this strategy implies not having a well diversified portfolio. That is partially true, but the reason is because you have to be able to follow your stocks, and if you have a portfolio of 15 stocks, it will be hard to keep track of where each stock is heading. On top of that you will be diluting your gains.

This strategy allows you to be disciplined and well diversified, and to cut your losses @ -7.00%, while cashing in gains as they come along. You may need to follow the price moves of your stocks almost everyday, while paying close attention the technical charts when the price gets close to one of your buy or sell points If there is a crash, despite having stop losses, the stop losses are not active during pre-market and after-hours, you would need to place a separate live order, and even if the stops were active during these periods you still won't be completely protected. If a crash occurs the first opening trades during the pre-market for example may be much lower than the previous day's closing price and may be much lower than your stop. For example assume you bought stock ABC @ $10 with a stop @ $8, and the price closes for the day @ $8.25. If a crash occurs the next day, when the pre-market opens the bid and asks could be $6.00 and $6.50. However, if you trade in the stock market this is a risk you have to assume; Only the careless would invest all their money that they have earned over the past years, it is important to cash in gains each year. For example when you first started trading you started with $10,000 and over the years you accumulated $5000 of gains. You would be stupid to invest your $15000 and risk all everyday, you should continue to invest $10000 and cash in the $5000, or just each year increase a little bit your investments if you can afford it to maybe $11,000 or $12,000. The whole point of this strategy is to cash in gains when you have them while continuing to investing the same amount of money without risking more, so that in the future your $10,000 investment may only represent a portion of gains you have accumulated over the years that you would otherwise never have had to begin with.During accumulation periods when the market moves sideways it may be harder to successfully use this strategy either way, you would need to be more precise in your buys and sells; and you may need to lower the profit point where you decide to take some profits or sell your position completely (for example selling portion or all shares of gain @ 10%-15% rather than 20%).