Trading Strategy Guidelines

Core rules and guidelines for our momentum-based trading system.

Strategy Overview

Type: Momentum-based with technical indicators Daily Investment: $10/day ($7 Core + $3 Growth) Risk Management: 2% daily loss limit, 10% max drawdown

Entry Rules (All Must Pass)

1. MACD Momentum Filter

• Required: MACD histogram > 0 (bullish momentum)
• Rejection: If MACD histogram < 0 → SKIP symbol
• Rationale: Only trade with the trend

2. RSI Overbought Filter

• Required: RSI < 70 (not overbought)
• Rejection: If RSI > 70 → SKIP symbol
• Rationale: Avoid buying at peaks

3. Volume Confirmation

• Required: Volume > 20-day average
• Rejection: If volume < average → SKIP symbol
• Rationale: Confirm momentum with volume

Position Sizing

• Tier 1 (Core): $7/day - SPY, QQQ, VOO
• Tier 2 (Growth): $3/day - Individual stocks
• Max Position: 10% of portfolio per symbol
• Risk per Trade: 1-2% of portfolio

Exit Rules

1. Stop-Loss: 5% trailing stop (Tier 1), 3% (Tier 2)
2. Profit Target: Take profits at 10% gain
3. MACD Reversal: Exit on bearish MACD crossover
4. RSI Overbought: Exit if RSI > 70 after entry

Data Source Priority

1. Cache (if recent)
2. Alpaca API (primary reliable source)
3. Polygon.io (secondary reliable source)
4. Disk Cache (if < 24 hours old)
5. yfinance (last resort, unreliable)
6. Alpha Vantage (avoid - rate-limited)

Philosophy

• Better to sit in cash than fight the trend
• Only trade when all filters pass
• Use reliable data sources first
• Fail fast on API errors

Integration

These guidelines are enforced in:

• src/strategies/core_strategy.py
• src/strategies/growth_strategy.py
• src/utils/market_data.py