Aggressive Entries with Joe DiNapoli's Bonsai and Bushes Strategies

Aggressive Entries with Joe DiNapoli's Bonsai and Bushes Strategies

For the trader with a high-risk tolerance and a need for speed, Joe DiNapoli offers the Bonsai and Bushes strategies. These are aggressive techniques designed to get into a trend as early as possible, often at the very beginning of a new price swing. Unlike the more conservative Minesweeper strategies, which wait for deep pullbacks, the Bonsai and Bushes setups are all about capitalizing on momentum. They are not for the faint of heart, but for the nimble trader who can handle the heat, they can be incredibly profitable.

The Rationale for Aggression

The driving principle behind the Bonsai and Bushes strategies is the idea that in a strong trend, pullbacks may be very shallow or non-existent. Waiting for a deep retracement could mean missing the trade altogether. These aggressive strategies aim to enter on the slightest pause in the trend, or even on a breakout to new highs or lows. The trade-off for this early entry is a higher probability of being stopped out, but the potential reward is also greater, as the entry price is often very close to the beginning of a major price move.

Bonsai vs. Bushes: A Tale of Two Stops

The primary difference between the Bonsai and Bushes strategies lies in their stop-loss placement. The entry for both is the same: in a strong uptrend, a long position is initiated on a breakout to a new high. In a strong downtrend, a short position is initiated on a breakout to a new low. The key is the context: these entries should only be taken when the DMAs are clearly aligned and the market is showing strong momentum.

With the Bonsai strategy, the stop-loss is placed very tightly, just below the 3x3 DMA for a long position, or just above it for a short position. This tight stop minimizes the potential loss if the breakout fails, but it also increases the chances of being stopped out by normal market volatility.

The Bushes strategy employs a slightly wider stop, placed below the 7x5 DMA for a long position, or above it for a short position. This gives the trade more room to breathe and reduces the likelihood of a premature stop-out, but it also increases the initial risk on the trade.

Sizing for Aggression

Given the higher risk associated with these aggressive strategies, position sizing is paramount. Traders should use smaller position sizes when employing the Bonsai and Bushes setups compared to more conservative strategies. This will help to mitigate the impact of the higher failure rate and protect trading capital from significant drawdowns.

A TSLA Example: Riding the Momentum

Let's look at an example of a Bushes strategy on a 60-minute chart of Tesla (TSLA). In early 2023, TSLA was in a effective uptrend, with the DMAs in a strong bullish alignment. The stock broke out to a new high at $200, triggering a long entry. The stop-loss was placed below the 7x5 DMA at $190. The trade was held as TSLA continued to surge higher, with the position eventually being closed for a substantial profit as the trend showed signs of exhaustion.

Conclusion

Joe DiNapoli's Bonsai and Bushes strategies are not for every trader. They require a high level of skill, a strong stomach for risk, and the ability to act decisively in fast-moving markets. However, for the experienced trader who understands the risks and can manage them effectively, these aggressive entry techniques can be a valuable tool for capitalizing on momentum and generating outsized returns.