[TTI] Lifecycle Trade: Sell Rules v2

2023년 4월 2일

––––HISTORY & CREDITS🏦
This script is based on the IPO Trading Lifecycle Trade Methodology by Kathy Donnelly and her team. It provides an implementation of their research on effective buy and sell rules for IPOs and Super Growth Stocks. The goal of this script is to help traders identify the best-performing sell rules, such as Ascender, Midterm, 40-Week, and Everest after they buy from IPO base. Henceforth these rules are used for IPO trading.

––––WHAT IT DOES 💡
1. Based on the methodology from the Lifecycle trade book, the script implements the best-performing sell rules (Ascender, Midterm, 40-Week, and Everest) based on profits, drawdowns, and time-in-market.
More details about the rules in section [DETAILS ON THE RULES].
• Everest Rule = comprises of 9 conditions for triggering and 3 conditions for exiting
• Ascender Rule = comprises of 3 exit Rules for 3 different exit points
• Midterm Rules = uses 2 different scenarios (rules for trades less than 1 year and those after 1 year)
• 40 week Rules = use price action around the 40 week to determine exit rules

2. There is a table with the performance of these rules (backtested). The table can be positioned where the user wants in the chart and can view the performance of the Sell Rules either by horizontally by Rule or vertically by IPO Chart Pattern (Rocket Ship, Late Boomer, One Hit Wonder, Pump and Dump or Stair Stepper).

––––HOW TO USE IT 🔧
1. Apply the script to your chart and choose your trade start date.
2. Watch for highlighted the sell rules (Ascender, Midterm, 40-Week, and Everest) to exit trades in a disciplined and systematic manner. If an exit rule triggeres it will be displayed on the chart. Buy points are not included in the script!
3. Adjust for your trading style, timeframe, and risk tolerance according to your preferences and the script's output. The rules utilize Short term, Mid Term and Long Term investors.
• Short Term Rules = Everest Rule, Ascender Rule
• Mid Term Rules = Midterm Rule
• Long Term Rules = Everest, 40 Week Rule

––––DETAILS ON THE RULES 📚
These rules use two main criteria to trigger- Price and Volume. Price is interpreted by how much the stock gains or loses in a given time period, wether it is printing consecutive up days or if it is has large gap ups that have not been unclosed.

Some of the techniques implement backtested thresholds like number of unfilled gap up in the last 10 days or when have largest volume or largest dollar gain happened relative to the IPO price. The rules also implement things like how many days have the stock been up for the last 10 days or if there are any large gaps +5% that have not been unfilled. Another signal that is being used is if we have had the largest $ gain since the stocks history in a given period. Volume is used to determine if there has been a significant volume influx since the IPO date of the history if so, this triggers a rule. Some rules are time based and look for specific price action during the history of the stock for instance certain rules are required in the first 252 days of the trading history and certain rules are required after the first 252 days of the price history. We are also employing closing under important moving averages as a guide wether or not a stock should be sold. Another technique is to see how much total gain has the stock moved. THis is important for RocketShip patterns. If it has made +500% moves this would trigger certain sell rules. Price analysis is also being used on higher timeframes. For instance if a stock moves below certain important levels in 2 consecutive weeks then this would trigger a violation of the setup.

The Table of results that can be turned on and off shows the backtesting results of the performance of the different 4 rules across the 5 main IPO trading patterns from the Lifecycle trade mechanism (Rocket Ship, Late Boomer, One Hit Wonder, Pump and Dump or Stair Stepper). The Table shows across the 600 IPOs that have been studies what has been the average Gain (%) for each exit rule for each IPO Pattern and what has been the $ DrawDown for the same rule per IPO Pattern. This information is very useful to have on chart in order to decide which exit rules best match the given IPO pattern that you are looking at.

!!Always use proper risk management and position sizing!!
Please note that this script is intended for educational purposes and should not be considered as financial advice. Past performance is not indicative of future results, and every trader should carefully consider their trading strategy and risk tolerance before entering any trade.