trading-strategy

trading-strategy

Overview

This skill provides comprehensive guidance on synthesizing multiple analyses into coherent trading strategies and actionable recommendations. Use this for final decision-making and trade structuring.

Instructions

1. Synthesize Multiple Signals

Integrate analysis from different sources:

• Technical Analysis: Trend, momentum, support/resistance
• Sentiment Analysis: Market mood, fear/greed levels
• Real-Time Data: Order flow, liquidity, recent price action

Weight each component by:

• Confidence level (higher confidence = higher weight)
• Timeframe alignment (multiple timeframes agreeing)
• Signal strength (strong vs weak signals)

2. Resolve Conflicting Signals

When analyses disagree:

• Technical bullish, Sentiment bearish: Often means "buy the dip" if technical is strong
• Technical bearish, Sentiment bullish: Often means "sell the rally" if technical is strong
• Mixed timeframes: Defer to higher timeframe for trend direction
• Low confidence all around: Recommend staying out or reducing position size

3. Generate eval_note (-1 to 1 scale)

Strong Buy Signals (0.6 to 1.0)

• Multiple timeframes aligned bullish
• Technical indicators show strong uptrend
• Sentiment at extreme fear (contrarian buy)
• High confidence from all analyses

Moderate Buy (0.3 to 0.6)

• Majority of signals bullish
• Some conflicting indicators
• Medium confidence
• Trend supports upside

Neutral (−0.3 to 0.3)

• Mixed signals across analyses
• Ranging market conditions
• Low confidence or uncertainty
• Wait for clearer setup

Moderate Sell (−0.6 to −0.3)

• Majority of signals bearish
• Some conflicting indicators
• Medium confidence
• Trend supports downside

Strong Sell (−1.0 to −0.6)

• Multiple timeframes aligned bearish
• Technical indicators show strong downtrend
• Sentiment at extreme greed (contrarian sell)
• High confidence from all analyses

4. Risk Assessment

Consider before making recommendations:

• Volatility: High volatility = reduce position size
• Liquidity: Low liquidity = widen stops, smaller size
• Time in market: Newer trends are riskier
• Correlation: Diversification reduces risk
• Black swan risk: Extreme events possible

5. Position Sizing Guidelines

Based on confidence and volatility:

• High confidence, Low volatility: Larger positions (up to max allowed)
• High confidence, High volatility: Medium positions
• Medium confidence, Any volatility: Smaller positions
• Low confidence: Minimal or no position

6. Entry and Exit Strategy

Entry Points

• Strong signals: Enter on market orders or limit near current price
• Medium signals: Enter on pullbacks to support
• Weak signals: Scale in gradually

Stop Loss Placement

• Below recent swing low (for longs)
• Above recent swing high (for shorts)
• Below key moving averages
• Account for volatility (wider stops in volatile markets)

Take Profit Targets

• First target: 1-2 risk/reward ratio
• Second target: Major resistance/support level
• Final target: Trailing stop to ride trend

7. Timeframe Considerations

Short-term trading (minutes to hours)

• Focus on 1H and below timeframes
• More sensitive to real-time data and sentiment shifts
• Tighter stops and quicker exits

Medium-term trading (days to weeks)

• Focus on 4H and daily timeframes
• Align with daily trend direction
• Wider stops, let positions breathe

Long-term trading (weeks to months)

• Focus on daily and weekly timeframes
• Strong fundamental and macro support needed
• Very wide stops, focus on major trend

8. Market Regime Adaptation

Trending Markets

• Follow the trend direction
• Use pullbacks for entries
• Trail stops to ride trends
• Ignore minor counter-trend signals

Ranging Markets

• Fade extremes (sell highs, buy lows)
• Tighter profit targets
• Avoid trend-following strategies
• Reduce position sizes

Volatile Markets

• Wider stops to avoid whipsaws
• Smaller positions
• Quick profit taking
• Consider staying out if too chaotic

Output Format

When synthesizing into a trading recommendation, provide:

{
  "eval_note": <float -1 to 1>,
  "confidence": <float 0-1>,
  "eval_note_description": "Comprehensive synthesis of all analyses with clear reasoning",
  "key_factors": [
    "Technical: Strong uptrend confirmed",
    "Sentiment: Extreme fear (contrarian buy)",
    "Real-time: Strong buying pressure"
  ],
  "recommended_action": "BUY" | "SELL" | "HOLD",
  "position_size": "FULL" | "MEDIUM" | "SMALL" | "NONE",
  "entry_strategy": "Market order | Limit at X | Scale in on pullback",
  "stop_loss": "Below X at Y",
  "take_profit": ["First: X at R:R 1.5", "Second: Y at resistance", "Final: Trailing stop"]
}

Decision Framework

Strong Conviction Trade Checklist

• Multiple timeframes aligned
• 2+ independent confirmations
• Clear support/resistance levels identified
• Sentiment supports the move (or contrarian extreme)
• Risk/reward ratio > 2:1
• Market structure supportive
• Liquidity adequate

Trade Rejection Criteria

• Mixed signals with no clear edge
• Low confidence across analyses
• Highly uncertain market conditions
• Risk/reward ratio < 1.5:1
• Counter to strong higher timeframe trend
• Illiquid or highly manipulated market

Best Practices

1. Never force trades: Wait for high-probability setups
2. Quality over quantity: Fewer high-quality trades beat many mediocre trades
3. Always know your exit: Plan stop loss and take profit before entry
4. Manage risk first: Protect capital over maximizing gains
5. Adapt to changing conditions: What works in trending markets fails in ranging markets
6. Keep it simple: Complex strategies with many rules often underperform
7. Document reasoning: Track what works and what doesn't
8. Stay disciplined: Stick to your strategy and don't chase
9. Cut losses quickly: Don't hope losing trades will reverse
10. Let winners run: Trail stops on profitable positions

Common Mistakes to Avoid

• Over-trading in low-conviction setups
• Revenge trading after losses
• Moving stops further away (hoping for reversal)
• Adding to losing positions
• Taking profits too early on winning trades
• Ignoring risk management rules
• Trading against the higher timeframe trend
• Fighting the tape (market momentum)
• Letting emotions override analysis
• Failing to adapt strategy to market regime