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 Bars (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 12-26-24).
How $SERV got my attention.
The entire focus of my swing / trend trading efforts is to buy a stock once strength has shown its hand. I don’t bottom feed, and I don’t buy value in these types of trades. I want to have momentum on my side.
The cornerstone for all entries begins with new 10-day highs after the most recent 10-day low.
Seen here $SERV makes a new 10-day high on December 2nd after the most recent 10-day low, November 18th.
Now the stock goes into my watch list to stalk it for a recognizable chart pattern that it can “break out” of.
I begin to notice at chart pattern forming on the lower time frames. Here it is on the 30 minute chart.
Now I’ve got a “recognizable” (*1 Note below) chart pattern that the stock can “break out” of. (*2 Note below)
Here’s what I now know that the stock is telling me.
- First, it’s showing strength. On December 2nd it made a new 10-day high after the most recent 10-day low.
- The stock is now in my stalking watch list.
- I spot a recognizable chart pattern that we could possibly break out of.
On December 5th the stock breaks out with Aggression. Seen here on the 30 minute chart.
The entry would be anywhere after the break out with an Aggression bar. Aggression bars are custom in Sierra Chart. I programmed them so that they show me extreme volume as well as extreme speed of the move relative to a look back.
Now that I’ve got an entry, I want to monitor for a spot to take some profits.
I always take 1/2 profit on the first 4hr Aggression bar after entry.
The next day, $SERV created a 4hr Aggression bar. I take some risk off. This was about a 30% gain on 1/2 the position.
Now that I’ve removed some risk, I’ll trend follow the remainder using the 10-day Donchain. A close below the 10-day with a Heikin Ashi bar will get out of the trade completely.
My trading is a hybrid approach. Swing trading for 1/2 of the position and trend following for the remainder.
Swing trading generally sells on strength and trend following generally sells on weakness.
So far, it’s working itself higher nicely.
If you have any questions, feel free to comment below or send me an email to [email protected].
Notes and Nuances:
*1. I am very loose with the term “recognizable”. I just want to see some structure building that everyone else can see too. This is crucial. I don’t want to buy a breakout that has very little participation. I want to see traders fighting over good trade location.
*2. “Break out from” is also up for interpretation. But, as a general rule, I always practice the idea from above in *1. If it’s a noticeable pattern that many traders other than me can see, then I have a spot where I can break out from. It’s also important that I have a good spot to break out from, so that I can define my risk based on this area of break out.
Leave a Reply