[Market Update Premium] A Simpler Rule Set for Position Trading

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This article is fromJulian Komar -Market Update Premium Subscription
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Tips :light_bulb:

  • Create a checklist for your daily routine for buying and selling.
  • Pre-calculate all entries and exits daily.
  • Use alerts to get notified before a stock breaks out of a base.

Important :warning:

Develop your own trading strategy and rules that fit your circumstances! Don’t blindly copy rules or try to mimic me or another trader—that rarely works. Do the hard work and design your own system :flexed_biceps:.

What is Position Trading?

Position trading means holding stocks for weeks to months and following the trend of a stock until it reverses. You want to stay in the stock as long as possible in a bull market to maximize profits :chart_increasing:.

Look at $AXON / $TASR - The Perfect Stock

Which Types of Stocks?

With this strategy, focus on growth and momentum stocks with existing sales and EPS numbers.

  • 20% sales growth YoY, better 40% or even 100%

  • 50% EPS growth YoY, better 500% or even 1,000%

  • Younger stock rarely have EPS. That’s okay as long as they have huge sales growth.
  • Story is crucial: Make sure the company is having innovative products or services (e.g. AI, data center, robotics, drones …)
  • Pure story stocks are okay to trade as long as the story / theme is in favor of the stock market
  • High relative strength to the S&P 500, strong momentum (up 50-100% in the last weeks or 70% above the 52 week low)
  • Prefer fast moving stocks with an average daily range of 5% or higher

You can find these stocks in the Top Stocks & Top Sales Growers & Top Momentum Stocks I analyze every week in the #Stock Research space. I introduce a lot in the daily preparation posts and videos too.

Watch the member webinar 2 for a deep dive: Member Webinar 2: Analysis and stock selection. EPS, sales, story and other fundamentals.

Screener setting: FinViz Screener Settings and Screener settings for MarketSmith

What to Look For?

Once you have a list of good candidates, spot strong trading bases in the weekly charts. I trade 3 different technical setups:

  1. Breakouts from flags, consolidations etc. This is my bread and butter setup.
  2. Stock made a big move like 50-100% in a couple of weeks.
  3. Extreme tight consolidation - Higher lows inside the consolidation.
  4. 3-5 weeks consolidation
  5. Strong volume in the prior momentum move
  6. Big growth in sales / EPS, hot story

Watch the member webinar 3 for a deep-dive: :television: Member Webinar 3: Setups and stars classification

  1. Breakaway gaps: Really good breakaway gaps are rare but they appear from time to time.
  2. Stock went nowhere since months
  3. Sideways consolidation or another big pattern
  4. Stock is in a long-term uptrend
  5. Gaps up on a catalyst like news, earnings etc.
  6. Huge volume on the gap up
  7. Price must open above the consolidation or close to it
  8. Big growth in sales / EPS, hot story

  1. Big base breakouts: These setups appear in more mature markets after a longer consolidation.
  2. Stock is in a clear long-term uptrend
  3. Consolidation over a couple of weeks to months (10 weeks or more)
  4. Sound chart pattern like flat base, cup and handle, VCP etc.
  5. Breaks out on strong volume
  6. Clean price action
  7. Big growth in sales / EPS, hot story

Find a lot of examples here: :down_arrow: IBD America Greatest Opportunities

Training video: 1.5 hours chart analysis with Julian - Train your eyes and mind

Chart book: The Chart Book From Julian - May 2025

Market Conditions Are Key!

Only trade when the general stock market is in a clear uptrend. That means …

  • the Market Trend Model is green (90% of successful trades appear in a green market!)
  • established an uptrend
  • net highs and increasing number of stocks above the MA 200

Experienced traders can take a position on rally days too.

You can wait until a Money Maker market is established. If you want to buy earlier, trade smaller or buy fewer positions. Early uptrends can fail. Normal trends last up to 50 days before needing a new consolidation.

Go through these rules daily to plan trades and adjust stop losses accordingly.

Watch this for a deep-dive about the Market Trend Model: Deep Dive MMTS

You get the indicators here: How to add the MMTS as an overlay behind your chart

Key Buy Rules :shopping_cart:

  1. Buy only the top setups that you can find. Be super selective! Only have the best 1-2 setups on your list per day.
  2. Buy as close as possible to the ideal breakout point. Either you put a buy order a few cents above the entry price or you buy at market if the stock breaks out.
  3. Ideal position size is 10-15%, depending on your risk appetite.
  4. Buy 50% of the planned position size direct at the entry, add another 30% 1-2% higher and buy the remaining 20% another 1-2% higher. You can put all orders into the market with a follow-up order. Check if your broker offers it. If you can’t do it, buy the whole position directly at the entry. Check this video: How I plan a trade and enter in 3 steps
  5. Place a stop loss order immediately after the buy 7-10% below your buy point. The tighter, the better!
  6. Don’t buy if the stock is more than 5% above the breakout point. That’s too extended and will you will get stopped out on the next pullback.
  7. Add only if your existing position is at least 20% in profit and do it after a consolidation of 3 weeks. Buy only more if the stock moves higher. Add only 10-20% of the existing position. Avoid to add on momentum trades that go vertical!

Key Sell Rules :chart_decreasing:

  1. Sell every stock at your planned stop loss point (7-10%) without hesitation. You want to have small losses!
  2. Move your stop loss to -5% if the stock shows you a profit of 1 times your initial risk (normally 7%).
  3. Move your stop loss to break-even if your position shows you a 2 times your initial risk profit (normally 14-20%).
  4. If a stock re-enters the base for 3-4%, sell 50% and buy it back if the stock has another re-breakout. Give weak stocks no room!
  5. Sell a stock that breaks below the EMA 8 or EMA 21 after it held it for 7 weeks and 3 pullbacks. Wait for the close or a break of the low of the first day that closed below the EMA.
  6. Sell stocks that go vertical into the strength: Sell at 2, 4, 6, … times your initial stop loss OR on big up days like 10%+.
  7. Sell on Climax top rules (stock is up 30%+ in 2-3 weeks after it was in a uptrend for months)
  8. Sell before earnings if you have less than 10% profit cushion or the stock acts very choppy.

Portfolio Management Rules :bar_chart:

  1. Hold a maximum of 10 - in good markets maybe 15-20 - positions. Limit yourself! Add only positions if your previous buys show you a profit.
  2. Rarely use margin and only if you are experienced with it.
  3. If you come from cash, buy 3 test positions and add only new positions if your previous buys show you profits and rallied for a couple of days to weeks.
  4. Avoid cluster risk: Hold only 3 positions from one sector, industry or theme.
  5. If you have more than 5-7 losses in a row, stop taking new positions and wait 1-2 weeks.
  6. If your equity curve drops sharply (>4% in one day) or drops below the MA 20, sell weak and losing stocks in your portfolio. Maybe sell 25% or more of your current holdings.
  7. Sell losing positions or weak stocks if the Market Trend Model switches from yellow or green to red. Maybe sell 25% or more of your current holdings.
  8. Additional rule: Think about to sell all losing positions on Friday. Go into a “green” weekend.