The Ultimate Guide To The PowerX Strategy

The Ultimate Guide To The PowerX Strategy | Coffee With Markus | Episode 129

Intro: 0:00
What Is A Trading Strategy?: 3:04
Entering A Trade - Indicators: 7:41
Exiting A Trade: 22:30
Calculating Stop-Loss & Profit Target: 30:28
Stop-Loss & Position Sizing: 37:36

The PowerX Strategy: A Powerful strategy for stocks and options:

What is a trading strategy?
1) What to trade?
2) When to enter?
3) when to exit
With a profit
With a loss -- Stop loss

Challenges of trading strategies:
Too Complicated
Too Discretionary
Don't have clear cut rules (like the previously mentioned 3)

A trading strategy:
1) Easy to understand & execute
2) Needs to be Mechanical -- with indicators
3) Clear entry and exit rules

3 ways stock can move:
1) Up
2) Down
3) Sideways

We need to know:
When to buy?
When to Sell?
When to not trade?

ENTERING A TRADE

Indicators: for a rising market:
1) RSI - Relative Strength Index. Osilates between 0 - 100. Look over the RSI over the past 7 days to see if it is above 50. If so, the stock is more likely to go up.
One indicator can give false positives, so it's a good idea to use more than one.
2) Stochastics (14, 3, 3) also want this to be above 50. If so the stock is more likely to go up.
3) MACD (12, 26, 9) If above the signal line, the stock is more likely to go up.

Indicators: for a falling market:
1) RSI - Relative Strength Index. Osilates between 0 - 100. Look over the RSI over the past 7 days to see if it is below 50. If so, the stock is more likely to go down.
2) Stochastics (14, 3, 3) also want this to be below 50, if so the stock is more likely to go down.
3) MACD (12, 26, 9) If below the signal line, the stock is more likely to go down.

Black Bars:
When you see black bars, this means that only two of the three indicators are pointing in the right direction. MEANS MARKET IS MORE LIKELY TO GO SIDEWAYS.

EXITING A TRADE

Limit your losses.
2% rule - Never risk more than 2% of your account on any given trade.

Profits.
When to take profits?
Golden Rule- 1:2. You take 2x the amount you risk as profits. You can be wrong half of the time & STILL make money.
SRC Profits
Systematic
Repeatable
Consistent

How to calculate stop-loss & profit target:

For Stop loss:
ADR = Average Daily Range (7 days)
Entry Price minus 1x's ADR = Stop loss.

For Profit target:
Entry price + 2x's ADR = Profit Target

"Nobody ever went broke taking profits"

Stop Loss and Position Sizing:
Stop Loss (ADR) = $0.40 per share ($0.40 just an example)
Overall Risk = $200 (2% based on a $10K account)
Position size: how many shares should we trade?
Overall Risk / Stop Loss
200 / 0.40 = 500 shares

Recommended Videos:
The PowerX Strategy Playlist:    • The PowerX Strategy  
The Options Wheel Strategy Playlist:    • The Options Wheel Strategy  
Options 101 Playlist:    • Options 101 - A Beginner's Guide To T...  
Options Income Trading Strategies:    • Options Income Trading Strategies  
The 5 Biggest Mistakes New Traders Make:    • The 5 Biggest Mistakes New Traders Make  
Generating SRC Profits - Here's How To Do It:    • How to Generate Systematic, Repeatabl...  

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