The KPL Swing is a simple trend following mechanical trading system which automates the entry and exit.
The trading system is extremely simple and easy to use, works across multiple time frames and does not require any in-depth knowledge of TA. It is somewhat similar to the turtle trading system.
The trading or investing logic is simple.... buy new highs (strength) and sell new lows (weakness). The default entry or decision level for long positions is a close above 20 days highest high.
No targets are given as profits are unknown and is whatever the market gives. Losses are predefined in advance before taking a trade.
Caveat: this indicator works best with indices and highly liquid stocks. It is not recommended for stocks with poor liquidity.
Example charts: NIFTY 60min - ACC - Asian Paint - HINDUNIVLR Dly / Wkly - RCOM - SBI - Sunpharma Wkly
Stoploss and Exit Strategy (delivery):
The kplswing indicator has no target because you can never know with certainity if a stock will give 100, 200 or 500% return in a year. But by staying in a trade as long as possible, you vastly improve the chances of atleast capturing a significant percentage of the big move.
Initial stoploss: 10% from entry price or recent swing low (long positions) or low of signal bar (tight, can lead to whipsaws).
Above example is for delivery trades. You can modify the logic for different timeframes and for the short side.
Quantity to buy = (1% of trading capital) / (Purchase Price - Stoploss)
Eg. You want to buy a stock trading at Rs.100/- with a stoploss Rs.90. The quantity you should buy is 1000/(100-90) = 100 shares. You are investing Rs.10,000/- and if your stoploss gets hit, your maximum loss will be Rs.1.000/-.
Another example. In above example, say the stoploss is Rs.95. The quantity you should buy is 1000/(100-95) = 200 shares. You are now investing Rs.20,000/- and if your stoploss gets hit, your maximum loss is still Rs.1.000/-.
It is obvious that with every stoploss your trading capital is reducing by Rs.1,000/-. After 80 consecutive losses, you still have Rs.20,000/- left! In reality, a good mechanical system should give excellet profits in your 2nd or 3rd trade itself (unless the stock is rangebound in which case it will be obvious).