Micro Stock Trader: Trading Strategy Optimization

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Thursday, January 16, 2025

Applying the Modified 10-Step Trading Plan to Our BETA Account – Using the Daily Chart for Trade Setups

Our Budget Ethical Trading Account (BETA) journey has reinforced the importance of choosing the right timeframe for trade execution. After testing different approaches, we found that the daily chart is the most effective for our capital level. By applying our Modified 10-Step Trading Plan to this timeframe, we can set up trades strategically, reduce unnecessary transactions, and align better with the broader trend. The latest price action in URC (Universal Robina Corporation) provides us with a perfect opportunity to refine our approach and develop a structured plan for Week 4 (January 20-24, 2025).

Introducing BETA: Budget Ethical Trading Account for Live Strategy Testing

The Modified 10-Step Trading Plan: Enhancing Risk Management and Flexibility

Mid-Day Trading Reflection: January 16, 2025 – Lessons from the Tactical Action

Transaction Costs and Tactical Adjustments – Refining Our Trading Plan

A daily candlestick chart of Universal Robina Corporation (URC) as of January 16, 2025, displaying a downward trend with price closing at Php 68.00. The chart includes moving averages (20-MA at Php 76.82 and 200-MA at Php 98.32), increasing volume, and a bearish breakdown.

URC Daily Chart as of January 16, 2025, showing a continued downtrend with price closing at Php 68.00. The chart highlights key moving averages, volume levels, and bearish momentum after breaking below the 20-day moving average (Php 76.82).

Applying the Modified 10-Step Trading Plan to the Daily Chart

Step 1: State

Current Market Condition: URC closed at Php 68.00, down Php 1.80 (-2.58%) from the previous session.
Trend: The price is below the 20-MA (Php 76.82) and the 200-MA (Php 98.31), confirming a strong bearish trend.
Volume: Increased selling pressure, with volume at 5.939M, indicating sustained downside momentum.

Step 2: Position and Location

Previous Support (Php 70.50) has been broken, meaning we should now look at Php 67.00-Php 66.50 as the next key support zone.
Resistance remains at Php 71.50 (our prior tactical exit level) and the 20-MA (Php 76.82).

Step 3: Assess Power Bars

The large red bar on January 16, 2025, confirms a continuation of the downtrend.
There is no immediate reversal signal—no bottoming tail or green candles with high volume.

Step 4: Entry Strategy (Simplifying Tactical Actions)

New Entry Criteria for Week 4 (January 20-24, 2025):
- Only enter if the price stabilizes above Php 67.00 with a reversal candle (green hammer, engulfing candle) and high volume.
- If the price continues to drop, wait for potential buying opportunities near Php 66.00 or lower.

Step 5: Place and Monitor Stop Loss

Hard Stop-Loss for Week 4: Php 65.50 (to avoid getting trapped in further breakdowns).
Trailing stop to be adjusted based on price action near Php 67.00-Php 68.00.

Step 6: Color Change (Trend Confirmation Before Action)

We will not enter until at least one strong green day appears, showing buying pressure.
A bullish confirmation should include a higher close than the previous day with above-average volume.

Step 7: Profit Taking (Strategic Exits Based on Daily Chart)

First tactical exit at Php 71.50 (prior support turned resistance).
Secondary exit at Php 75.00 if momentum continues upward.

Step 8: Re-entry (Avoiding Frequent Trading)

No intra-day re-entries—we will only re-enter if the daily chart confirms sustained bullish movement.
If stopped out at Php 65.50, we will wait for consolidation before another entry.

Step 9: Tactical Position Management

Reduce the number of transactions to max 2 per week:
- One well-timed entry based on support confirmation.
- One exit when a key resistance is hit (or stop-loss is triggered).

Step 10: Counter-Trend Entries (Only for Strong Reversals)

If URC drops below Php 67.00 but quickly rebounds, we will monitor for a potential bounce trade.
However, if no reversal signal appears, we stay out.

Week 4 (January 20-24, 2025) Trading Plan

Scenario 1: URC Stabilizes Above Php 67.00

Action: Buy small position (50 shares) only if a green reversal candle appears with strong volume.
Stop-Loss: Php 65.50 (to protect capital).
Exit Target: Php 71.50 for partial take-profit.

Scenario 2: URC Drops Below Php 67.00 Without Reversal

Action: No trade—wait for consolidation near Php 65.00-Php 66.00.
Review Stop-Loss Placement: Adjust potential buy levels accordingly.

Scenario 3: URC Breaks Above Php 71.50

Action: Monitor for momentum. If volume supports it, we can buy on retracement to Php 70.00-Php 70.50.
Exit Target: Php 75.00 or trailing stop at Php 72.00.

Key Adjustments for the BETA Account

Limit Trading Frequency:
- Only one entry and one exit per week unless major trend shifts occur.
Avoid Intra-Day Trading:
- Entries will only be based on the daily chart, not smaller timeframes.
Respect Key Support and Resistance Levels:
- Php 67.00 is a critical zone—any buying must be confirmed by a green candle and volume.
- Php 71.50 is a hard resistance—exit immediately if reached.
Trade Only When the Reward Justifies the Risk:
- Minimum target price differential must be Php 3.00 per share to offset transaction costs.

A daily candlestick chart of Universal Robina Corporation (URC) as of January 16, 2025, marking essential trading levels for Week 4 (January 20-24, 2025). The chart shows hard resistance at Php 71.50, support at Php 67.00, stop-loss at Php 65.50, and a bargain price at Php 60.00, with volume analysis.

URC Daily Chart as of January 16, 2025, setting up the Week 4 Trading Scenario. The chart highlights key support at Php 67.00, resistance at Php 71.50, and a hard stop-loss at Php 65.50, with a bargain price of Php 60.00 for potential accumulation.

Final Thoughts

Our experience over the past two weeks confirmed that the daily chart is the best timeframe for our BETA Account. By simplifying our tactical actions, focusing on stronger price moves, and avoiding intra-day noise, we can maximize capital efficiency and minimize unnecessary losses.

For Week 4, our strategy is clear: wait for a confirmation candle at Php 67.00 before entering, set a tight stop-loss, and target Php 71.50 for exits. This disciplined approach aligns with our goal of small-scale, ethical trading with cost-conscious decision-making.

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.

Summary of Trading Activity

Period Covered: January 14-16, 2025
Principal Portfolio Value: Php 15,000.00
Current Portfolio Value (Equity): Php 14,749.54
Realized Gain/Loss: Php -250.46
Number of Transactions: 12

The past three trading days provided valuable insights into how transaction costs and tactical trading decisions impact overall performance. Despite adhering to a structured trading plan, the effects of frequent re-entries and high trading costs eroded our capital efficiency. Below, we analyze these implications and outline recommendations for refining our approach.

A 5-minute trading chart of Universal Robina Corporation (URC) dated January 16, 2025, annotated with tactical exits at Php 69.80 and Php 71.50, tactical re-entries at Php 70.85 and Php 71.20, and a support level near Php 70.50. The chart shows a morning price surge, with moving averages and volume trends assisting in trade execution.

Annotated 5-minute chart of URC on January 16, 2025, highlighting tactical re-entries, exits, and key price levels. The chart reflects a morning rally following a tactical re-entry at Php 70.85 and Php 71.20, with key resistance and support levels marked for strategic decision-making.

Cost Implications and Capital Erosion Analysis

Transaction Costs Impact

Php 1.00 Break-Even Differential: The impact of transaction costs was more significant than anticipated. With 12 transactions executed, these costs eroded potential gains, limiting profitability.
Frequent buying and selling without substantial price movements led to excessive trading fees:
- Example: Selling 100 shares at Php 70.00 and re-buying at Php 70.85 or Php 71.20 increased costs rather than yielding profit.

Over-Trading

12 transactions in 3 days for a Php 15,000 portfolio is high-frequency trading, which is not suitable for a small-scale account.
Repeated tactical re-entries (e.g., multiple small buys on January 14 and re-entries on January 16) diluted capital efficiency instead of optimizing profits.
Effect: Instead of focusing on fewer, high-probability trades with larger price differentials, multiple entries and exits compounded transaction costs.

Capital Erosion from Unrealized Efficiency

Portfolio Impact: The Php -250.46 loss represents a 1.67% decline in equity in just two days.
Reasons for Erosion:
- Small price differentials between entries and exits did not offset the break-even costs.
- Tactical decisions did not fully account for transaction cost structures, leading to net losses instead of gains.

Key Observations and Lessons Learned

Frequent Re-Entries Add Little Value

On January 14, the portfolio executed seven buy transactions at different price points between Php 69.40 and Php 71.45.
Lesson: Consolidating these buys into fewer transactions at clear price zones (Php 70.00-Php 70.50) could have reduced costs and improved execution efficiency.

Inefficient Tactical Re-Entry

On January 16, two re-entry trades at Php 70.85 and Php 71.20 led to increased exposure at higher prices, despite limited upside potential given resistance near Php 71.50.
The subsequent tactical exit at Php 70.10 compounded losses, as the break-even cost differential could not be recovered.

Poor Reward-to-Cost Ratio

While tactical trades aimed for small gains, the actual cost of these transactions outweighed the potential rewards.
The small average price movement (Php 0.50-Php 1.00 per trade) did not justify the high trading frequency.

Strict Stop-Loss Execution Is Essential

The planned stop-loss at Php 70.10 was not executed, exposing the position to further downside risk.
Lesson: Implement automated stop-loss orders to avoid missing critical exit points due to manual execution delays.
Lesson: Have contingency plans for rapid price movements to ensure immediate responses to market conditions.

Recommendations for Improvement

1. Focus on Fewer, High-Probability Trades

Action Plan:
- Reduce trade frequency and consolidate tactical entries into larger, well-timed positions.
- Example: Instead of multiple small buys on January 14, one or two larger buys at key support levels (Php 70.00 or Php 69.50) could reduce costs while maintaining exposure.

2. Widen Tactical Price Targets

Break-Even Costs:
- To offset the Php 1.00 transaction cost differential, trades must target price movements of Php 2.00 or more to be profitable.
Action Plan:
- Only execute trades where clear technical indicators (e.g., support/resistance breaks, volume spikes) signal potential for larger price movements.

3. Use Stop-Losses Strategically

Observation: The stop-loss at Php 70.10 on January 16 was necessary but ineffective due to execution delays.
Action Plan:
- Set stop-loss levels at key support points (e.g., Php 70.00 or Php 69.80).
- Avoid re-entering trades unless strong upward momentum is confirmed.

4. Prioritize Cost Efficiency

Observation: Transaction costs are disproportionately high relative to the portfolio size.
Action Plan:
- Reduce trade volume (focus on fewer but higher-quality trades).
- Explore cost-efficient brokers or strategies with lower break-even thresholds.
- Hold positions longer to minimize transaction costs.

5. Analyze Market Context Before Re-Entry

Observation: Re-entering at Php 71.20 after selling at Php 70.00 ignored the broader market trend and increased risk.
Action Plan:
- Re-enter only at key support levels with clear reversal signals (e.g., green candlesticks with strong volume).

Conclusion

The Php -250.46 loss reflects the impact of frequent tactical trades combined with transaction costs. While the strategy demonstrated discipline with stop-losses and tactical exits, it lacked efficiency in minimizing trading costs and maximizing price differentials.

Moving Forward:

Focus on fewer, high-quality trades with larger price targets.
Be mindful of transaction costs and consolidate tactical actions to preserve capital.
Maintain discipline with stop-losses and re-entries only when supported by strong market signals.

This experience reinforces the importance of balancing tactical agility with cost-consciousness to ensure sustainable portfolio growth. By refining our approach, we aim to enhance capital efficiency while maintaining a structured, disciplined trading plan for future trades.