Mega Thread on Exit Strategies (Long-Mid Term Portfolios) 👇

We talk about systematic exit a stock portfolio in a bear market in this 🧵

Most have made good profits in stock positions and its always good to be aware of what can be done when markets turn bearish

Read on.
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1. Death Cross (50MA Crossunder 200MA)

This is a popular method to judge whether the stock/index is in a bear or bull market.

Book profits at a death crossover

My view: Not the best way of exit, there are better, more refined ways.

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2. MA based Systematic Exit

MAs used:
21MA - 1 mnth avg.
65MA - 3 mnth avg.
150MA - 6 mnth avg.
250MA - 1 year avg.

Exit 25% if 21MA below 65MA
Exit 25% if 21MA below 150MA
Exit 50% if 21MA below 250MA

This method handles short term correction while having skin in game
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3. ATR based Stop (Supertrend, Chandelier Exit, Chande Kroll)

For positional exit, ATR based trailing stop can be used.
ATR multiples are 3(aggressive), 5(conservative) are used

My preference is exit 25% on ATR(20,5) breach daily, full position on ATR(20,3) breach wkly

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4. Ichimoku KUMO Breach

The KUMO cloud offers good support areas.
Exit 25% on breach of top of cloud
Do nothing while price inside the cloud
Exit FULL when price breaches cloud on downside

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Thread on Average True Range (ATR)

- J. Welles Wilder created the ATR back in 1978

- ATR measures the volatility of the instrument

- Direction cannot be ascertained by using ATR

- Min/Max : 0 to 100

- Handy tool to measure volatility caused by Gap up/downs

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The formula for ATR is

Average of True Range = avg( max[(high - low), abs(high - previous close), abs (low - previous close)], length)

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Usage 1 : Volatility Regime Filter

Periods of High and Low volatility can be identified by a slow and fast ATR crossovers.

In high vol regimes, the fast ATR is above the slow ATR and vice versa for low vol

ATR crossover cannot be used to go long or short!!

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Usage 2 : Mean Reversion

Extreme price movements are followed by reverting to the mean (equilibrium price). ATR bands can be plotted on chart to identify such extremities and take high probability mean reversion trades

Complementing indicators are stochastics, RSI

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Usage 3: Pyramiding Strategy

Legendary trader Richard Dennis borrowed $1,600 and made $350 million in 6 years

The concept around his Turtles trading strategy revolves around Pyramiding, Position Sizing and Risk Mngmnt calculated with ATR

Below is a example of pyramiding

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Happy Diwali everyone 🙏!

Here is a #TradingView example that calc ideal position size for your acc. size and max risk

The position is volatility adj. (⏫vol,⏬pos size)
Am sure you will see immediate results if you follow this position mgmt. concept

RT,❤️& DM for the script!

Inputs:
1. Max Account value
2. Max Risk
3. Long / Short
4. ATR based SL and TP targets

Output:
1. SL and TP price targets
2. Max CASH and FUT positions allowed
4. Risk/Reward Ratio

For traders who are fond of moving averages, Here are some practical pointers:
1. Get rid of the shorter term moving average completely in case of crossovers (unless its 5 period or less, or used for smoothing data)

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2. Considering moving to Moving Average Bands
- baseline with high and low
- baseline with ATR bands
-baseline with STDev bands (Bollinger)

my chart study with moving average is like this👇

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3. Avoid trades on a moving average crossover (unless its long term averages used for direction bias)

Below are the trades from a 3x5 moving average crossover system

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Lets talk about returns (risk adjusted!)

We are used to seeing % returns made against capital or even % made against margin blocked.

This is a wrong way to see the strategy performance due it doesn't take into account the risk taken to generate that return.

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Thus the formula to calculate the "risk adjusted return" is:

Sharpe ratio = (Current Return - Risk Free Rate)/ Stdev(Historical Returns)

Lower Sharpe ratio means the strategy is unsustainable even if profit factor and win% are satisfactory.

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Some tips:
- Calculate the Sharpe Ratio of the entire portfolio vs individual stock
- Track the Sharpe Ratio regularly as it can vary based on historical performance
- Even a low return portfolio/strategy can have higher Sharpe Ratio if the risk undertaken is less!

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Thread on INDICATOR DUPLICATION

We usually try our hands with some of the well known indicators to see if they have an edge.

But the fact is that most indicators are based of the humble...you guessed it.. MA

Lets see this with famous ones : RSI, Wil %R, CCI, PSAR, MOM, ROC

RSI, William %R 50 level crosses coincide with 14 MA crossovers

CCI, Momemtum crosses coincide with 14 MA crossovers

PSAR, ROC crosses coincide with 14 MA

🥊Candle "Wicks" have their own story to tell🥊

@ every timeframe, its like a boxing match between the buyers and sellers.
Candle Body (🟩/🟥) tells who won the round

What about the Wicks?
They do tell a story.. read on..

#StockMarket #sharemarket
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LONG LOWER SHADOWS and HAMMERS
- The sellers are pushing the buyers hard or the buyers play a waiting game and eventually power the price higher

See the chart below, the buyers are not willing to lose and eventually the sellers give up.
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LONG UPPER SHADOWS and SHOOTING STARS
- The buyers unable to keep the price higher for long and eventually give up.

See the chart below, the sellers strength is too much for the bulls
Some cases the sellers prevent from price going higher.. this is evident from the wicks
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HEIKIN ASHI CANDLES

HA candles do a good job at identifying indecision and unanimous movement of a counter

HA range candles give us the places where
- we should avoid direction trades
- prepare for a directional move

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WICKS FOR STOCK PICKING

A glance of a stock tells us about the volatility of the stock

If most of the candles have wicks then the counter is volatile in that time frame

SL hits are common

Look for stocks that have proportionate wicks if you are a conservative trader
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