Contents:
- Phase 1: Initial Testing of the Strategy
- Phase 2: Expanding to Multiple Stocks
- Major Refinements
- How These Refinements Prepared Us
- Recommendations for February 2025
- Conclusion
Since January 16, 2025, our Hybrid 10-Step Trading Strategy has undergone significant refinements based on live testing through our Budget Ethical Trading Account (BETA). Initially, we focused on single-stock execution using daily charts, but as our understanding deepened, we expanded the approach to multiple stocks and incorporated monthly charts for broader trend confirmation.
Evolution of Our Hybrid 10-Step Trading Strategy – Key Refinements and Live Trading Insights
Phase 1: Initial Testing of the Strategy (January 16 – January 21, 2025)
- We started with URC as the primary test stock, refining entry and exit strategies using our Modified 10-Step Trading Plan.
- Trading frequency was limited to one entry and exit per week, avoiding overtrading and excessive transaction costs.
- Entries were strictly based on daily charts, with stop-loss discipline introduced early.
- Tactical entries were balanced against core positions to enhance execution and minimize risk.
Phase 2: Expanding to Multiple Stocks (January 21 – February 2025)
- January 21, 2025: Completed Phase 1, after exiting URC due to price weakness, highlighting the importance of disciplined execution.
- January 23, 2025: Began testing multiple stocks (URC, MONDE, ALLHC, DDMPR, and RCR) while applying the Hybrid 10-Step Trading Strategy for trade evaluations.
- January 24, 2025: Conducted our first trade evaluation (URC – Trade No. 3), reinforcing the importance of volume confirmation and trade rating assessments.
- January 31, 2025: Implemented a BETA Portfolio Rebalancing to refine position sizing and sector diversification.
Major Refinements to the Hybrid 10-Step Trading Strategy
As our live testing evolved, we made key adjustments that prepared us for the portfolio-wide rebalancing on January 31, 2025:
Shift from Single-Stock Testing to Portfolio-Wide Application
- Initially, we tested the strategy on URC alone but later expanded to 11 stocks, requiring a new way of assessing trade performance.
- New Rule: Live testing must now include at least 20 trades per stock rather than 20 trades overall.
Integration of Monthly Charts for Long-Term Trend Confirmation
- While the daily chart remains useful for tactical adjustments, we realized that monthly charts provide a more reliable trend context.
- New Rule: Monthly charts are now our primary timeframe, while daily charts are used for monitoring daily volume trends and short-term setups.
Emphasis on Dynamic Stop-Loss Adjustments
- Early on, we found that rigid stop-losses were too restrictive, leading to premature exits.
- New Rule: Implement a hybrid approach with hard stop-losses for deep protection and dynamic stop-losses for trade flexibility.
Stronger Trade Evaluation Metrics & Risk-Reward Adjustments
- By January 24, 2025, we introduced trade rating scores (6.6–8.8 out of 10) to assess entry logic, risk management, and trade execution.
- New Rule: Trades must have a minimum 7/10 rating before execution to ensure quality setups.
Portfolio-Wide Adjustments & Tactical Rebalancing (January 31, 2025)
- The market's high volatility necessitated reallocating capital across multiple stocks to reduce single-stock exposure.
- New Rule: Implemented BETA Portfolio Rebalancing to increase diversification and avoid concentration risk.
How These Refinements Prepared Us for the January 31, 2025 Portfolio Rebalancing
Our gradual refinement of the Hybrid 10-Step Trading Strategy ensured that we were well-positioned to handle the market conditions leading up to January 31, 2025:
Portfolio Expansion Decision
- Our realization that 20 trades were insufficient for a true strategy evaluation led us to extend testing to 20 trades per stock.
- This allowed us to apply the strategy across different market conditions and stock types, avoiding a biased assessment.
Risk Control & Dynamic Trade Adjustments
- The introduction of dynamic stop-losses and volume confirmation helped us exit positions at the right time, minimizing losses.
- The new rule of waiting for volume-backed breakouts saved us from premature entries.
Emphasis on Higher-Quality Trade Setups
- The 7/10 trade rating threshold ensured that we only executed high-probability trades, reducing unnecessary risks.
- This forced us to maintain discipline, even when multiple stocks showed potential but lacked sufficient confirmation.
Strategic Portfolio Rebalancing
- By January 31, 2025, we had a clearer understanding of which stocks aligned best with our trading approach.
- This led to rebalancing our BETA portfolio, ensuring that we had the right mix of core holdings and tactical trades.
Recommendations for February 2025
With our Hybrid 10-Step Trading Strategy now optimized for live market conditions, our next steps focus on further refinement and disciplined execution:
1. Execute the 20-Trade Per Stock Rule
- Our testing must now be expanded to at least 20 trades per stock, ensuring a comprehensive evaluation.
- This will allow us to compare performance across different stocks and market conditions.
2. Strengthen Monthly Chart Implementation
- While the daily chart remains important, our primary trading decisions will now be based on monthly charts.
- This will filter out short-term noise and focus on broader trend movements.
3. Enhance Volume Analysis for Entry & Exit Decisions
- No trade should be executed without volume confirmation supporting the setup.
- Institutional selling pressure must be considered before entering any trade.
- New Rule: We shall only enter breakouts with above-average volume, ensuring institutional support.
4. Maintain Disciplined Execution & Trade Rating System
- We must continue using the 7/10 trade rating system to ensure that only high-quality trades are executed.
- No deviation from the strategy is allowed—absolute discipline is required.
5. Adapt to Market Conditions & Adjust Position Sizing
- Given the volatility observed in January 2025, February’s market conditions must dictate position sizes.
- New Rule: Core positions should remain steady, but tactical entries should be adjusted based on risk-reward ratios.
Conclusion
With the lessons learned from January 2025, we are entering February 2025 with a fully refined version of our Hybrid 10-Step Trading Strategy. The decision to expand testing to 20 trades per stock, focus on monthly charts, and strictly enforce volume-backed breakouts ensures that we execute our trades with absolute discipline.
Our next goal is to execute a minimum of 20 trades per stock with full adherence to the strategy. After completing this expanded live testing, we will conduct a final performance review to determine the overall effectiveness of the Hybrid 10-Step Trading Strategy.
🚀 February 2025 marks the next evolution of our trading journey. The strategy is set—now, it’s all about disciplined execution. 🚀
Disclaimer: This post is for informational purposes only and should not be considered financial advice. Always do your own research before making any trading decisions.
Related Readings
- Micro Stock Trader: Comparing the Modified 10-Step Trading Strategy vs. Retracement Trading Strategy
- Micro Stock Trader Portfolio Tracker Page
No comments:
Post a Comment