Thursday, October 15, 2009

Y-Wing 2.0 exposed to too much risk

I can see today that I have to review my latest trading strategy Y-Swing 2.0, as it seems to have a few flaws which may expose you to more risk than I would've wanted to. For now anyone following my trading strategy, I would suggest to use the first version of it, Y-Swing. I will now be working on making adjustments to my strategy, in regards particularly to stop losses, and buy stop orders. What I've learned from today is that despite having -7.00% stop losses set after every order, these orders should be placed in relation to what can be seen from the technical analysis (support and resistance levels). Basically what I'm saying is is when you buy a stock, you should look at where the support levels stand and that they are not over -7.00% or you may get whipsawed like I mostly did today with LVS. Although for beginners who don't know much about technical analysis, the first version of my strategy Y-Swing, is still a good place to start (placing stop loss orders simply within -7.00% of your entry point). I will now be more careful in my future predictions and analysis before giving BUY and SELL orders. I believe that the goal is not only to get a BUY signal, but to be able to get in near support levels, so that there is much less chance of seeing your -7.00% stop order triggered. I now actually think that stop loss orders should be placed just under support levels, when there are clear SELL signals. The current Y-Swing 2.0 strategy mat still work well with low beta stock, as you will have more time to react. However, I believe that even the +3.00% buy stop orders, should vary and be placed at ranges where it would signal another BUY signal, rather than simply place a stop BUY order at +3.00% which is based on nothing. The same can be said toward the -7.00% stop loss orders. So, to conclude I will now be working on developing perhaps on Y-Swing 3.0, as I believe Y-Swing 2.0 exposes too much risk.

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