For the past few months, we’ve talked about the 2 Volatility Quotient (VQ) strategy in TradeStops. We originally presented this idea of Doubling up on your winners and have since followed up with several other articles. There are good discussions about the 2 VQ strategy here and here.
We’ll set up a separate portfolio for this and use a stock that has had a strong uptrend for the past year as our example.
Next, we’ll add the stock Nvidia Corp. (NVDA) to the 2 VQ Portfolio. NVDA has had a strong run in the past year and is trading close to its high.
The VQ at the time was 20.80%.
Let’s assume that we decided to take a position using $1000 of risk. In other words, we were willing to risk $1000 of NVDA’s normal volatility on the trade.
We can use the Position Size calculator to determine how many shares we could have bought. When you go into the calculator, you can change the Entry Price so that you’ll be able to use the exact historical price. Then, set up the stop loss strategy as a trailing stop using the historical VQ.
The calculator lets us know that we can buy 153 shares of NVDA.
We can now add that position into our 2 VQ portfolio. We’re going to use an SSI alert for this position.
As you most likely know, you can have more than one alert set up in TradeStops. Here is where we’re going to add the 2 VQ alert. It does require a little work on our part before we can enter this alert.
The VQ at the time of purchase was 20.80%. We’ll multiply this number by 2 and we come up with 41.6%. This is the alert we want to create for this position. In the “Positions and Alerts” tab, click on the “Alerts” tab and then we’ll add an alert.
Click “Next” and then the Alert window opens up. We want to set up a “Price” alert that notifies us when NVDA has moved 41.6% above the entry price.
This 2 VQ alert will then trigger at 41.6% above our entry price. That works out to $44.21. It’s that easy.
This is the current 2 VQ Portfolio in TradeStops. There are a total of 4 positions. Each of these positions has 2 alerts. The first alert is the SSI alert to let us know when the SSI Stop is triggered. The second alert is the 2 VQ Price alert that we originally created for each position.
The triggered alerts are in purple. The alerts that are not triggered are in black. The triggered alerts are the first 2 VQ alerts that we set up. The 2 VQ alert for the last position of NVDA has not been triggered.
To profitable trading,
Education Director, TradeStops