Birdinhand Trading Strategy

BirdinhandInvestments:Trading Strategy

Andrew Braun

(301) 807-0413

[email protected]

About Birdinhand

Birdinhand Investments is the sole proprietorship of Andrew Braun, a graduate of NYU’s Stern School of Business in Finance and Economics. I have been trading since

2009, both independently and with the New York-based Star Alliance Capital Partners.

While with Star Alliance Capital Partners, I traded a book of equities with strategies of my own creation, used technical backtests to create and adapt trading hypotheses,

and helped trainees and new traders improve their trading techniques while also fine-tuning my own. I am looking to gain more of this type of experience in a position in

the financial services sector.

I was employed previously at the Abernathy Group, where I recommended investments that were added to the firm's portfolio, developed intricate historical

backtests that were used to implement new investment plans, and created tools to analyze potential equity ventures. Furthermore, I took notes and participated in each

morning’s investment strategy conference call, providing me with invaluable knowledge of wealth management practices.

In a nutshell…

Fibonacci Retracements

• Trades are made based upon Fibonacci Retracement levels (0, .236, .382, .5, .618, .786, 1).

• Buy and sell orders are triggered at all levels other than 0 or 1.

SPY Fibonacci Retracements

Chart Types

• Trades are made using minute, hour, day, week, and month charts (amount of time per bar).

• Always trade with the trend.

Chart Types

• The maximum time apart between the high and the low (0 and 1) of a Fibonacci Retracement for each chart type is:

– Bar Length = Time Apart

– 1 minute = minimum 30 minutes, maximum 1 day (depending on time of day)

– 1 hour = 2 months

– 1 day = 1 year

– 1 week = 5 years

– 1 month = minimum 5 years, maximum 20 years (depending on availability)

• So, on a daily chart, the Fibonacci Retracement would never stretch for more than one year, or from, say, January 1, 2011 to January 1, 2012.

• The high and low within that period of time is the basis for the Fibonacci Retracement.

SPY Minute Chart

Spy Hour Chart

Spy Day Chart

Spy Week Chart

Spy Month Chart

Entries & Exits

• The initial entry point of any trade is made by a limit order on a Fibonacci Retracement level, not 0 or 1.

• The intended target is at a point, five percent below or above the next Fibonacci level, long or short, respectively.

SPY Entry & Exit

Same SPY Entry & Exit

Buy Your Winners

• This initial entry point makes for the start of, potentially, a three tranche trade.

• The next entry would occur at market, roughly, accounting for slippage, 1/3 from the initial entry point to the target.

• The final entry would occur, again, at market, 2/3 from the initial entry level.

SPY 1/3 & 2/3 Levels

Sell Your Losers

• The initial stop price is 50 percent from the entry to target, in the negative direction.

• This stop can be hit if only the initial entry occurs, with no other transaction occurring in between, or if both the initial entry and 1/3 level entry occurs, but the plus 50 percent threshold has not been crossed (that being 50 percent between the initial entry and the target).

SPY Stop Loss

Breaking Even

• Once the plus 50 percent threshold is crossed, the stop is moved up to the initial entry point.

• Thus, if all three tranches are taken on, all three are sold at either the intended target price or the initial entry point.

• If the intended target is hit, all three pieces are profitable.

• If the trade retraces back to the initial entry point after all three additions are made, at least losses are managed for two of the positions, and, on a gross basis, the initial position would break even.

SPY Initial Entry Stop

Same SPY Initial Entry Stop

Exceptions to the rule…

The Flip-Flop Position

• It is acceptable if one takes on a long position at a particular level, say .618, and that trade, after reaching its target or hitting a stop, drops beneath the .618 line, and later triggers a short signal, again at .618.

• The same is true if the first trade is short and the second is long, on, say, the .382 line.

• This, however, may only occur once.

• If a third consecutive signal is triggered on any given line, this should be considered a ranging pattern, and not a proper environment in which to trade.

SPY Flip-Flop

The High/Low Turnaround

• The situation above, however, should not occur at all along the .236 and .786 lines.

• If a stock makes a new high or low within the allotted time envelope (the maximum time apart, mentioned earlier), or retraces nearly 100 percent of a previous high or low, a trade should not be taken in the opposite direction until triggered at, at least, the .382 or .618 level, respectively.

SPY High/Low Turnaround

The Back-to-Back

• Additionally, consecutive initial entries, in the same direction, will not happen on the same Fibonacci line, regardless of whether the first trade produced a profit or loss.

SPY Back-to-Back

The Minimum Time Rule

• In order for an initial entry to be triggered, there must be a certain number of consecutive bars that remain fully above or below the intended entry point (including high and low):

– Bar Length = Consecutive Bar Length

– 1 minute = 5 minutes

– 1 hour = 5 hours

– 1 day = 5 days

– 1 week = 4 weeks

– 1 month = 3 months

The Minimum Time Rule

• For example, in order to trigger a long initial entry at the .382 line, on a daily chart, the previous five (minimum) consecutive days must not touch the .382 line. If the price retraces to the .382 level three or four days after it last touched or broke through it, a trade will not occur.

SPY Minimum Time Rule

Mind the Gap

• If a final target is hit before the next tranche can be taken (say, on a gap up or down on any given day), the next trade should never take place, and profits should be taken immediately. This is true regarding both the second and third tranches.

• Similarly, while a better initial entry point below or above the intended one, long or short, respectively, is generally favorable, do not enter an initial transaction if it is within 25 percent of the predetermined stop limit. Otherwise, one can find oneself taking on a position, only to be stopped out in short order (no pun intended).

SPY Gaps

Minute-Trading Exceptions

• All trades are intraday.

• To trade a particular stock, the previous month’s average daily range (high to low) should be at least one point.

• No trade occurs before 10 am.

• Each day begins a new Fibonacci Retracement.

• All initial entry points occur $0.01 above or below the Fibonacci level, long or short, respectively, and all target points are $0.02 below or above the next level, long or short, respectively.

• There must be at least $0.13 between one level and the next to trade within those levels.

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