Trend Following
╔═══════════════════════════════════════════════════════════════════════════╗
║ ║
║ TREND FOLLOWING STRATEGY - QUICK REFERENCE CARD ║
║ 3:1 Risk/Reward ║
║ ║
╚═══════════════════════════════════════════════════════════════════════════╝
┌───────────────────────────────────────────────────────────────────────────┐
│ ENTRY CRITERIA (Need 2+ of 3) │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ ☑ Price > 20-day MA AND Price > 50-day MA │
│ → Uptrend in place │
│ │
│ ☑ RSI 50-70 OR ADX > 25 │
│ → Momentum confirmed │
│ │
│ ☑ Volume > 20-day average │
│ → Institutional buying │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ POSITION SIZING │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ Alpaca Paper: MAX $5,000 per position │
│ Alpaca Live: MAX $500 per position │
│ Schwab: MAX $1,000 per position │
│ │
│ Risk per Trade: 2% of account │
│ Cash Reserve: Keep 50%+ in cash │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ EXIT RULES (NON-NEGOTIABLE) │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ STOP LOSS: 5% below entry │
│ → Set IMMEDIATELY after entry │
│ → NEVER move lower │
│ │
│ PROFIT TARGET: 15% above entry │
│ → 3:1 risk/reward ratio │
│ → NEVER take profits before target │
│ │
│ Example: Buy at $100 │
│ Stop at $95 (-5%, risk $5) │
│ Target at $115 (+15%, reward $15) │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ NEVER (These will destroy your account) │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ ❌ Move stop loss lower │
│ ❌ Take profits before target hit │
│ ❌ Add to losing positions (averaging down) │
│ ❌ Skip entry criteria ("looks good" is not a criterion) │
│ ❌ Revenge trade after loss │
│ ❌ Risk >2% per trade │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ ALWAYS (These will make you profitable) │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ ✅ Set stop loss immediately after entry │
│ ✅ Follow entry checklist (2+ criteria required) │
│ ✅ Document all trades (entry, exit, reasoning) │
│ ✅ Respect 2% risk limit per trade │
│ ✅ Hold for target OR stop (nothing in between) │
│ ✅ Check market hours before placing orders │
│ ✅ Verify symbol and price before submission │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ VALIDATION (Before moving to live) │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ Minimum Trades: 30 closed trades │
│ Target Win Rate: 33-45% (yes, below 50% is OK!) │
│ Required EV: >$0 per trade │
│ Target Sharpe: >0.5 minimum (prefer >1.0) │
│ Max Drawdown: <20% of account │
│ Rule Compliance: 100% in last 10 trades │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ EXPECTED PERFORMANCE (Per 10 Trades) │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ Winners: 3.75 trades × +15% = +56.25% │
│ Losers: 6.25 trades × -5% = -31.25% │
│ Net: +25.00% profit │
│ │
│ Per $1,000 invested: $250 profit per 10 trades │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ TRADE EXECUTION CHECKLIST │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ Entry: │
│ [ ] 2+ entry criteria met │
│ [ ] Position size calculated (2% risk) │
│ [ ] Within max position size limit │
│ [ ] 50%+ cash reserve maintained │
│ [ ] Market hours confirmed │
│ │
│ Immediately After Entry: │
│ [ ] Stop loss set at entry × 0.95 (-5%) │
│ [ ] Profit target set at entry × 1.15 (+15%) │
│ [ ] Trade documented in log │
│ │
│ During Hold: │
│ [ ] Check position daily │
│ [ ] DO NOT move stop lower │
│ [ ] DO NOT take profits early │
│ [ ] Be patient, trust the system │
│ │
│ Exit: │
│ [ ] Hit target OR hit stop (only 2 exits) │
│ [ ] Document exit reasoning │
│ [ ] Calculate P&L and R/R achieved │
│ [ ] Note lessons learned │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ MENTAL GAME (Most important) │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ "Let winners run. Cut losers fast. Trust the system." │
│ │
│ Remember: │
│ • 60-65% of trades will LOSE (this is normal!) │
│ • The few big winners pay for all losses │
│ • Discipline beats intelligence in trading │
│ • Following the system > being "right" on one trade │
│ • Emotions are the enemy (fear, greed, FOMO, revenge) │
│ │
│ When you want to break a rule: │
│ 1. Read this card │
│ 2. Take a 10-minute break │
│ 3. Ask: "Am I following the system or my emotions?" │
│ 4. Choose discipline │
│ │
└───────────────────────────────────────────────────────────────────────────┘
┌───────────────────────────────────────────────────────────────────────────┐
│ KEY CONTACTS & RESOURCES │
├───────────────────────────────────────────────────────────────────────────┤
│ │
│ Strategy Document: │
│ ~/mem-agent-mcp/specs/2025-10-28_trend-following-strategy.md │
│ │
│ Trade Log: │
│ ~/Documents/memory/entities/trading/trend-following-trades-2025.md │
│ │
│ Portfolio Check: │
│ uv run python3 tools/portfolio_fetcher.py │
│ │
│ Analytics: │
│ uv run python3 tools/trading_analytics.py │
│ │
└───────────────────────────────────────────────────────────────────────────┘
╔═══════════════════════════════════════════════════════════════════════════╗
║ ║
║ "The goal is not to be right. The goal is to make money." ║
║ ║
║ Version 1.0 | Created: 2025-10-28 | Review: 2025-11-28 ║
║ ║
╚═══════════════════════════════════════════════════════════════════════════╝
📋 HOW TO PRINT THIS CARD¶
Option 1: Print from Terminal (macOS)¶
Option 2: Convert to PDF¶
# Install pandoc if needed
brew install pandoc
# Convert to PDF
pandoc TREND_FOLLOWING_QUICK_REFERENCE.md -o quick-reference.pdf
# Open and print
open quick-reference.pdf
Option 3: Copy to Text Editor¶
# Open in text editor
open -a TextEdit TREND_FOLLOWING_QUICK_REFERENCE.md
# Then: File → Print
# Suggested: Landscape orientation, Courier font
Option 4: Simple Copy-Paste¶
- Open this file in any text editor
- Select all (Cmd+A)
- Copy (Cmd+C)
- Paste into Google Docs / Word / Notes
- Set font to "Courier" or "Monaco" (monospace)
💡 PRO TIP: Laminate It!¶
Once printed: 1. Take to FedEx/UPS/Staples 2. Ask for lamination (8.5×11 size) 3. Cost: ~$2-3 4. Post it next to your monitor 5. Reference it BEFORE every trade
Why laminate? - Prevents damage from coffee spills - Looks professional - Shows commitment to the process - Physical reminder = harder to ignore
🎯 WHERE TO POST IT¶
Best locations: - ✅ Next to your trading monitor (primary) - ✅ Above your desk - ✅ On your office wall - ✅ Photo on your phone (for mobile trading)
DON'T: - ❌ In a drawer (you won't see it) - ❌ In a file (you won't reference it) - ❌ "I'll remember it" (you won't)
The card only works if you SEE it before EVERY trade!