Online Stock Trading Plan Updated

Marginal Stock Trader is updating his online stock trading plan with this post. Like what I've said before, this exercise is largely a practical application of the expert advise given in PART 2 of the international bestselling book The Complete Guide to Day Trading: A Practical Manual From a Professional Day Trading Coach by Markus Heitkoetter.

MARGINAL STOCK TRADER TRADING PLAN

For the year 2009

Section 1: Financial Goal

Marginal Stock Trader wants to make:

• 150,000 pesos per year
• 12,500 per month
• 3,000 per week
• (see the post Marginal Stock Trader SMART Goals and Plan)

Marginal Stock Trader account size:

• 3,500 pesos for opening balance
• (see the post Make A Living As A Day Trader)

Marginal Stock Trader is willing to risk:

• 50% of his trading capital
• (see the post Long Position in Ayala Corporation)

For more details about the next sections, please see the post Developing Day Trading Strategy for Stocks:

Section 2: Selecting a Market
Marginal Stock Trader will trade the following market:

• stock market
• Philippine Stock Exchange
  
• trading just a single issue, Ayala Corporation stock
• using BPI Trade for online broker
  

Section 3: Selecting a Timeframe
Marginal Stock Trader will trade the following timeframes:

• 10 days
• 30 days
  

Section 4: Selecting a Trading Style
Marginal Stock Trader will use the following approach:

• trend-following for primary trading strategy
  
• trend-fading for secondary trading strategy
  

The underlying idea is:

• for trend-following – when prices are moving up, we buy, and when prices are going down, we sell
• for trend-fading – when prices are trading at an extreme (e.g. upper band of a channel), we sell, and then we try to catch the small move while prices are shifting back into “normalcy.” The same applies for buying.
  

Section 5: Entry Signals
Long Entry:

• Using Simple Moving Averages for trend-following: BUY signal is generated when the closing price moves above the moving average
  

Short Entry:

• Using Relative Strength Index (RSI) for trend-fading: BUY signal is generated when the RSI crosses the oversold-zone from below

Section 6: Exit Signals

• Simple Moving Averages: SELL signal is generated when the closing price dips below the moving average.
• Relative Strength Index (RSI): SELL signal is generated when the RSI crosses the overbought- zone from above.

Profit Target: Our profit exit strategy shall be expressed in a fixed amount of 35 pesos per share of Ayala Corporation. We simply add 35 pesos to our entry price, and exit the trade as soon as prices move up 35 pesos.

Stop Loss: Our stop loss rule shall be expressed in a fixed amount of 12.50 pesos per share of Ayala Corporation. We simply subtract the peso amount we specified from our entry price , and exit the trade as soon as prices move down 12.50 pesos.

Minor Bottom: As of this date, Marginal Stock Trader has also identified a Minor Bottom at 270 pesos. Should there be any prolonged reaction period and we are caught in a long position, we set our stop loss at 5% below this line at 257.50 pesos.


Related Post:

Marginal Stock Trader