Anatomy of a Trade: A Step-by-Step Breakdown of an Oliver Velez Setup

Selecting the Right Stock

The first step in any trade is to select the right stock. We are looking for a stock that is in a clear uptrend and has good liquidity. For this example, let's use Apple (AAPL). AAPL has been in a strong uptrend for several months, and it is one of the most actively traded stocks in the market.

Identifying the Entry Signal

We will use the daily chart to identify the entry signal. We are looking for a pullback to a key support level. In this case, AAPL has pulled back to its 50-day moving average, which has acted as support in the past. On the daily chart, we see a bullish hammer candle forming at the 50-day moving average. This is our entry signal.

Executing the Trade and Setting the Stop-Loss

We will enter the trade on the next day, as the stock opens above the high of the hammer candle. Let's say we enter at $150. We will place our stop-loss below the low of the hammer candle, at $145. Our risk per share is $5.

Managing the Trade and Taking Profits

We will use a trailing stop to manage the trade. We will use the 20-day moving average as our trailing stop. As long as the stock remains above the 20-day moving average, we will hold the position. If the stock closes below the 20-day moving average, we will exit the trade. In this example, AAPL continues to trend higher for several weeks. We eventually exit the trade at $170, for a profit of $20 per share.