Anatomy of a Swing / Trend Following Trade – $EOSE

How it got my attention, stalking it, waiting for it to set up, execution, and trade management.

Tools used for this trade.

• TC2000 (daily scanning for swing setups)
• Heikin Ashi and regular candlestick bars
• Sierra Chart (executing a more precise entry)
• Aggression (this is what I named it…custom coded indicator for Sierra Chart)
• Donchian Channels

In this post I’m going to go through the entire process of this trade. Starting from the moment it arrived in my daily scan, to stalking it for a spot to execute a trade, to removing some risk, and how I’ll eventually close it out (the trade is still open as of 12-19-24).

How $EOSE got my attention.

From a swing / trend following mindset, I won’t give a second glance to anything that hasn’t made a new 10-day high after the most recent 10-day low. I scan for this. Not the entire universe, select criteria. See more about it in this post.

On Monday, November 25th $EOSE made a new 10-day high after the most recent 10-day low. I placed it into a “stalking” watch list. I will then monitor the daily chart and periodically cycle through the lower time frames to see if any structure is building. Some structure that we can “break out” from.

I’m a breakout trader. I’m not a bottom feeder looking for a deal. I don’t buy value. I don’t anticipate breakouts. I want to buy when I get confirmation that there is extreme excitement and fervor in the stock or futures contract.

The first step to achieving this and keeping me on the side of the momentum is to wait for a new 10-day high to be made, after the most recent 10-day low. There’s nothing unique about this. It’s arbitrary really. I could choose a new 5-day high, or a new 50-day high, or even a new 1,000-day and I don’t think it would really matter in the end.

It’s all about process. Having a process that I follow – like a religion.

Here’s what it looked like on a Heikin Ashi daily chart. New 10-day high, after the most recent 10-day low.

Now it’s got my attention. It goes into a different watch list where I’ll stalk it for an entry.

Now I’ll go to Sierra Chart, where I’ll look at it on the smaller time frames.

Here’s what caught my attention. On the 30 minute chart. Some nice structure building. I am constantly cycling through regular candles and Heikin Ashi bars. I can get a more holistic view if I do this. Many times I’ll catch something that is absolutely perfect on the Heikin Ashi chart that is just a choppy mess on the regular candle chart, and vice versa.

Up this point, here’s what I now know.

1. $EOSE made a new 10-day high after the most recent 10-day low.
2. On the smaller time frames there is a recognizable chart pattern.
3. Now I have something to “break out” of.
4. I can plan the trade in advance. If this happens, I’ll do this, with this much size, according to a stop located here. Etc.
5. When / if it breaks out, I won’t be thinking. I’ll just be reacting. Zero thinking. None. When I start thinking on the fly, I lose.

On November 29th, the breakout came, and I was ready to enter.

The last piece of confirmation I need to take the trade is Aggression. It’s something proprietary that I coded in Sierra Chart. It shows me with a painted bar if there is extreme volume and urgency in the speed of the move…relative to a look back period.

I will NOT execute a breakout trade without the presence of an Aggression bar. I usually want to see it happen on a 30 minute or a 15 minute breakout bar. If I want to get in earlier, I can use the 5 minute. Even the 1 minute can be used to get in early. Although the risk of the trade failing on the smaller time frames is greater. I’ve found that the 15 and 30 minute are just fine most of the time.

Everyone gets hung up on entries.

I was a victim of this too. In fact, I could teach the class on how to agonize on how to get the best entry. Then, I decided to let go of that agony.

• Do I have a plan to place the trade when my if / then system tells me to do so?
• Do I have a plan to size appropriately so I can let the trade breathe? Most trades don’t go in a straight line.
• Do I have a trade management plan? What will I do once I get in this trade, how do I get paid?

If I have answers to these questions, then I did my job. After these questions are answered, then I’m just a glorified button clicker. (Note *1 more on this below)

I’m in the trade, now what.

I trade via a mind algorithm. I do the same things over and over and over. I do not want to think. I don’t want to guess. I just react.

If I say I want to sell into strength…that’s great. But, what is strength exactly? How do we define strength? Is it just magnitude of move? How do I know that a massive move the next day was not all that strong, and that I should sit tight and wait for “real strength” to exit some of the position? The only way I can do this is to have a system for taking the guess work out of my trading.

I use the Aggression bars. I’ll wait for an Aggression bar to paint on the 4hr time frame. (Note *2 more on this below)

On December 16th I got my signal to remove 1/2 risk.

I still have a 1/2 position on and I’ll trend follow it. I want to see a Heikin Ashi close below the 10 day Donchian to close it out. This will keep me in the trade for as long as possible. (Note *3 read more below)

I’ll update this page when the trade concludes or if I get a spot to add to the position. In the meantime, if you have questions you can comment or send me an email. [email protected] .

Notes and Nuances:

*1 I have the same thinking when it comes to day-trading. While the execution is much faster than executing a swing / trend trade. The concepts are universal. For instance: What am I looking for? What will get me into a trade? Why here…why would I take this trade now? Once I’m in the trade, now what?

The trade planning is done in advance so I know when my if/then statements are true – there is zero thinking. When I think on the fly, I lose.

*2 I like the 4hr to scale some profits because it’s not too long and not too short. I want to scale some profits when we’ve had a long period of volume and speed of movement euphoria. I want to scale out of some when traders think that it’ll never go down again. When that feeling kicks in, it’s time to take some risk off the table. The 4hr gives me that. Conversely, there would be too many 15min Aggression bars, and I’d be guilty of taking profits too quickly before real strength kicked in. The daily chart would give so few signals that I may never get out of a position.

Until I find a better system, the 4hr works.

Sometimes, price will go straight up in the days after I enter. But a 4hr bar will never print Aggression and I’ll eventually get stopped out. That’s trading. That means the move was not strong. The strongest moves will print a 4hr Aggression bar at some point after my entry.

*3 I stole the exit portion of this system from Jerry Parker. I believe he uses 4 different systems. But his smallest look back is much higher than mine. Maybe it’s the 150day Donchian – can’t remember. Meaning he would close his position on the 150 day new low (I’ll wait for a Heikin Ashi close). He also stays in trades for years at times. I’m certain his system is better as he’s a billionaire.

I don’t know the exact details of how he trades. I’ve just pieced together some nuggets here and there from interviews. I’ve been highly influenced by Jerry.

Jerry would never sell partials though. Again…Jerry is a billionaire. His system is better in every way…guaranteed.