Buy Signals Sell Signals: Strategic Stock Market Entries and Exits pdfdrive com

30/15-day breakout
This type of system is based on the concept of trading a large diversified futures
portfolio across all different categories; metals, energy, rates, equities,
agricultural commodities, and currencies. The position sizing for this strategy
should be small enough to limiting risk to no more than 1% of total trading
capital on any one losing trade. Profitability is based on the probability that one
market will break and trend strongly to offset losses.
This is a trend following breakout system where your buy signal is a new 30-day
breakout high price, and your sell short signal is a new 30-day breakdown to a
low in price. This means you are buying a new 30-day high in price or selling
short a new 30-day low in price. There are two potential sell signals for this
strategy. The traditional strategy is to maximize the ability to capture the trend
by selling your long positions with any new 15-day low in price. This acts as
your stop loss if it fails to trend, or a trailing stop if it continues to trend after
your entry and you were in a profitable trade. The second potential exit strategy
is to set your stop loss from your entry signal at three ATRs over a 100-day
period. The ATR is a trailing stop, so as volatility contracts or expands, your
stops gets wider or tighter each day.

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The ATR acts as a tighter stop loss on your entry, because it will take you out in
a matter of a few days if the trend reverses, and lock in more profits late in a
trend by taking you out much faster. The downsides to the ATR stop is that you
can be stopped out of a trend faster and miss some larger trends by being shaken
out prematurely on pullbacks. You have to choose whether to risk more and
attempt to maximize gains, or be willing to give up some returns to reduce your
drawdown.
The other two trend following systems work the same as the original example
just on different timeframes.