The Wolf_strategy.pdf

THE LONE WOLF STRATEGY I have been watching, back testing and jotting down results of this strategy ever since I have come across it. This strategy is NOT my original work but has been borrowed from the Internet. I have seen that the strategy works on all Time Frames and on Index and Stocks alike. How the strategy works?? For the strategy to work there has to be a trend. The stock should not be in a Range. I have not back tested for Range scenarios, but it might work for that also. The strategy basically is a counter trend strategy but with confirmation. Everyone must have heard of the proverb ‘To put a Spanner in the works’. This strategy does exactly the same thing. It puts a spanner in the work of an established trend (depending on the Time Frame). This strategy is a one candle or a two candle setup. We watch for additional confirmation using only Price Action although one can use their favourite indicator. To the naked eye, the candle or candle pair will stick out of the ordinary and can make the following move obvious. In certain cases the move is obvious and the position can be taken and in some cases with confirmation, the position can be taken. The strategy works for both Long entry and short entry. The Stop Loss is not at all big and the Targets can be anything (I am not a big fan of Targets). I would urge the readers to explore more at their end and come up additional strategies to implement as per their trading style. This is only a framework and may or may not work for you. This strategy will have an edge as not all will be working on a single instrument. Just have a small set of instruments and take the trades whenever it qualifies for you. Let’s study this strategy with some examples!!

The above is the RIL, Daily chart. The first thing to look out for in the strategy is a trend. Now the Red arrow is the Lone wolf after confirmation. Lone Wolf because for me it is a breakout failure and also for confirmation it closes below the previous high as marked. One can also short as the per Lone Wolf Strategy at the red candle. But conservative traders can wait for confirmation. Take the second instance. Observe where it’s written ‘will not buy here as no confirmation’. Here as there is no confirmation of a double bottom or piercing candle, so there is no Buy signal. On the second attempt there is a double bottom and a buy signal. Here the Lone wolf will be the white bullish candle. Again in the last instance, we have a double bottom as confirmation and a Buy position can be taken after the formation of the Lone wolf bullish candle. It is a Daily chart hence the trades will be positional. Keep SL as per your risk level but as one can guess, the SL will be very small.

Let’s take another example:

Look closely at the blue arrows. All are formed after some kind of trend and if bought at the Lone wolf candle formation, the SL would have been very small and rewards handsome. The beauty of the strategy is that the SL is very small and will not polish off a large chunk of your trading capital. Another example:

Here is the Daily chart of Bharat Finance Inclusion. The two reasons that made the Lone wolf strategy working here is 1) Bullish Engulf and 2) Breakout failure of Round Number 500. A SL of a rupee or two would have given fantastic return. Also the red candle sell signals are Lone candles which have been formed after confirmation and break out failure of the previous swings. Breakout failure will make any following move, a strong one.

Few more Examples:

Al ways prefer a full bodied black candle followed by a white candle to make the move powerful and vice versa for Short signal.

Here is another example which one can use in confluence with Trend Lines:

One can try and look out for the same strategy on smaller time frames. I hope I was able to convey the message and the strategy. One can email me at [email protected] for more clarification. Twitter Handle: varun550@blisstrades