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Strategizing your trading plan

A trading strategy involves establishing a set of criteria for trade entry/exit. It usually involves stock filters, triggers, time frames and etc. Three common trading strategies are Breakout-Pullback-Continuation (BPC), Trailing profit/stop loss below EMA20 and Higher High & Higher Low (HH HL)

  1. Breakout-Pullback-Continuation (BPC). This strategy allows traders to capture the lower risk zone upon the entry of a particular stock. Firstly investors/traders would monitor for a firm price breakout above resistance or trendline. Upon the breakout, we could wait for the pullback phase. Lastly, the entry would be initiated after the pullback phase ended.

bpc sample

2. Trailing profit/stop loss below EMA20. This strategy is used to trail profits and cut loss level through the exponential moving average 20 days (EMA20). Investors/traders HOLD onto the shares as long as the share price is above EMA20 level. Meanwhile, investors/traders would have to cut loss/take profit once the price closed below the EMA20 level.


3. Higher High & Higher Low (HH HL). A stock’s price forming higher high and higher low (HH HL) is on an uptrend intact formation. Investors/traders are advisable to trade/focus on uptrend counters amid the higher possibility of a continuous trend (history repeat itself).

HH HL.png

Once investors/traders have identified their own set of trading strategies, it is advisable to keep a trading journal. A trading journal allows investors/traders to (i) track their historical trades, (ii) understand both profits and losses, (iii) track their risk tolerance level, (iv) review their performance and (v) establish remarks in order to improve future trading strategies.

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