iBankCoin
I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
4,121 Blog Posts

Milking a Winner: A Case Study in Position Trading

Position trading is often mistaken as swing trading, but the time frames are quite different.  After talking to 100s of traders and investors, I realized most people want to position trade.  They want trades that last 2-10 days.  This is an ambitious goal, generating wins on this time frame but our software, Exodus, is well-equipped for the task.

I just sold my second piece of Joy Global, leaving me with just a ‘runner’ or swing position.  Let’s review the reasons behind the actions taken during this trade.  It was methodical and I’d like to cement this approach into my brain [and hopefully you learn something too].

The stock was chosen after completing a top-down analysis of the market.  You can review the process here:

I loved the JOY chart at the time, because it had a trend day [or ‘conviction day’ as Option Addict says] to work with.  This was the chart picture on the day I bought JOY:

JOy-convic-day-032616

Four days later I sold 1/3 of my position.  This locked in some profits in case the stock gave back its move, which was a popular pastime back in 2015:

JOy-firstscale-032616

I held the rest of the position for 10 trading days.  Once 10 trading days were done, I continued to hold the position but lifted my stop, or sell price, to the prior bar’s low.

For a position trade, that meant as long as the prior day’s low held, I would stick with it, putting me in a position to ‘milk the trend’ if it wanted to keep running.  But this afternoon [day 11] I sold my next 1/3 after we took out yesterday’s low.

I use a similar method for futures trading to allow the market to run in my favor.  Yesterday I did an impromptu video about this trade management.

The time frame is radically different for futures trading.  I don’t even use time-based bars.  I use Renko bars, but the same trade management applies, using the prior bar’s low once ten bars print, check out the video if you want some extracurricular study:

For the final 1/3 of my JOY holding I set a stop way down at my cost basis.  I have no idea what JOY will do going forward, but I  have a risk free swing trade in the name that can be passively managed, checking on it weekly.  Not bad.  There are worse jobs.

See Also: OH $JOY

People often say manage your losers and the winners will take care of themselves.  Well I think that’s bullshit.  You have to know how to manage your winners too.  For me, that means being a bit more hands on.  Your approach could be different, that’s fine.

This is just a simple method for position trading.  Risk is mitigated by a 10-day or 10% stop-loss.

Mad of today my trade is up nearly 50%.  They won’t all be jumbos, but some will.

JUMBO!  The next idea I’m letting effervesce is much less sexy, NYLD, but I like it.

 

 

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6 comments

  1. boyaj

    Hi Raul, I really appreciate this post. Very detailed and insightful; great knowledge for anyone.

    One quick follow up question. Why is your stop-loss for the final 1/3 lot at your cost basis? How come it’s not higher up (maybe in between current price and cost basis)?

    By no means am I questioning/trolling you; merely asking for my own knowledge and application. I appreciate the answer in advance, and hope you have an awesome weekend.

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    • Raul

      It’s a good question. Maybe I should use the 68% fib retracement. Just trying to keep it simple

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  2. Earl

    (golf clap)

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  3. helicopter ben

    Am I way off on this? I though swing was 2-10ish days and position was going long or short based on expectations under a year. An example would be I thought Fly had a “position” trade in TLT.

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    • Raul

      Most people agree with you, but I’m convinced a swing trade is a longer duration.

      I had a solid source but I’m not finding it right now.

      In reality it’s just our attempt to understand something by labeling it. Very Aristotlian of us.

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  4. wisprjet

    Thank you for taking the time to explain the charts. Very interesting. I was wondering about the “candle” and your explanation and visual is quite helpful.

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