# Parameterized Trading Signals - Complete Reference ## πŸ“Š Foundation: 10-Year Pattern Analysis **These 11 signals are derived from 10 years of Scott's actual trading patterns (2016-2026).** - βœ… Extracted from real brokerage statements spanning 2016-2026 - βœ… Each signal parameter refined based on 10 years of live trading experience - ⚠️ **Not validated against real market data.** The "2-year backtest, 214 trades, 52.8% win rate, 1.81x profit factor" figures quoted elsewhere are output from a Monte Carlo simulation (`research/backtest_10year.py`) β€” randomly generated prices, randomly timed entries, no call to the signal engine below. They are not a proven track record. See [`research/README.md`](research/README.md) for the full explanation. **Why These Parameters?** Because Scott's actual trades followed these exact patterns over a decade. These aren't theoryβ€”they're distilled from real trading behavior. Whether *following* them going forward performs the way the simulation suggests is untested; that's what paper trading is for. --- ## Signal Categories There are **4 signal categories** that trigger actions in Scott's strategy: 1. **ENTRY SIGNALS** (When to buy calls) 2. **EXIT SIGNALS** (When to sell calls) 3. **SECTOR SIGNALS** (When to purge sectors) 4. **REBALANCE SIGNALS** (When to rebalance account) --- ## ENTRY SIGNALS (Buy Signals) ### Signal 1.1: BUY SIGNAL - Uptrend Confirmed **Trigger Parameters:** ``` Price > 20-day Simple Moving Average √ Entry only if uptrend is confirmed ``` **Exact Calculation:** ``` IF stock_price > SMA_20 THEN β†’ Entry signal ready β†’ Wait for additional confirmation ELSE β†’ No entry (skip this stock) ``` **Real Example (RCL):** ``` Stock Price: $95.50 20-day MA: $93.20 Result: $95.50 > $93.20 βœ“ PASS β†’ Continue to next signal ``` **False Negative Example (BA):** ``` Stock Price: $178.30 20-day MA: $181.50 Result: $178.30 < $181.50 βœ— FAIL β†’ Skip this stock today ``` --- ### Signal 1.2: Volume Spike Confirmation **Trigger Parameters:** ``` Today's Volume > 1.5x Γ— 20-day Average Volume √ Confirmation signal for entry ``` **Exact Calculation:** ``` volume_ratio = today_volume / avg_volume_20day IF volume_ratio > 1.5 THEN β†’ Volume spike confirmed β†’ This supports entry ELSE β†’ Wait for spike (or enter if other signals strong) ``` **Real Example (RCL):** ``` Today's Volume: 2,400,000 shares 20-day Avg: 1,000,000 shares Ratio: 2,400,000 / 1,000,000 = 2.4x Result: 2.4 > 1.5 βœ“ PASS β†’ Volume spike confirmed, good entry ``` --- ### Signal 1.3: Breakout Signal **Trigger Parameters:** ``` Stock Price > Previous 5-day High √ Entry signal: technical breakout ``` **Exact Calculation:** ``` recent_high_5day = MAX(price_last_5_days) IF current_price > recent_high_5day THEN β†’ Breakout confirmed β†’ Entry signal triggered ELSE β†’ No breakout (consolidating) ``` **Real Example (GOOG):** ``` Yesterday High: $192.00 2 Days Ago High: $191.50 3 Days Ago High: $190.75 ... Recent High (5-day): $192.50 Today's Price: $192.75 Result: $192.75 > $192.50 βœ“ BREAKOUT β†’ Breakout confirmed, buy signal active ``` --- ### Signal 1.4: Pullback Entry (Within Uptrend) **Trigger Parameters:** ``` Price dips 2-3% from recent high, then recovers √ Entry signal: low-risk pullback ``` **Exact Calculation:** ``` recent_high = recent 5-day high pullback_low = lowest price in pullback pullback_pct = (recent_high - pullback_low) / recent_high IF 0.02 < pullback_pct < 0.03 AND price_bouncing_up THEN β†’ Low-risk pullback entry β†’ High probability entry ELSE β†’ Not the right pullback ``` **Real Example (META):** ``` Recent High: $450.00 Pullback Low: $438.00 Pullback %: ($450 - $438) / $450 = 2.67% Result: 2.67% is in the 2-3% range βœ“ Entry Price: $445.00 (recovering from pullback) β†’ High-probability entry ``` --- ### Signal 1.5: Moving Average Bullish **Trigger Parameters:** ``` Stock Price > 20-day MA > 50-day MA √ Trend structure bullish ``` **Exact Calculation:** ``` IF price > SMA_20 AND SMA_20 > SMA_50 THEN β†’ Trend is bullish (uptrend sandwich) β†’ Support structure intact ELSE β†’ Not bullish enough ``` **Real Example (GOOG):** ``` Current Price: $192.75 20-day MA: $189.30 (SMA_20) 50-day MA: $185.00 (SMA_50) Check: $192.75 > $189.30 > $185.00 Result: βœ“ Bullish structure β†’ Uptrend is healthy ``` --- ## Entry Checklist (All Signals) **To enter a position, you need:** ``` [ ] Price > 20-day MA (Signal 1.1) [ ] Volume spike > 1.5x (Signal 1.2) OR Breakout (Signal 1.3) OR Pullback (Signal 1.4) [ ] Price > 20-day MA > 50-day MA (Signal 1.5) [ ] Not more than 7 open positions already [ ] 8% of account value available [ ] <14 days to option expiry (don't enter if expired soon) ``` **Your position is ready to enter when 5/5 criteria are met.** --- ## EXIT SIGNALS (Sell Signals) ### Signal 2.1: Profit Target Hit **Trigger Parameters:** ``` Current Call Price >= Entry Call Price Γ— 1.40 (Call value up 40% or more) ``` **Exact Calculation:** ``` entry_call_price = price_when_bought current_call_price = current_market_value profit_pct = (current_call_price - entry_call_price) / entry_call_price IF profit_pct >= 0.40 THEN β†’ SELL IMMEDIATELY β†’ This is your primary profit target ELSE β†’ Hold (not at target yet) ``` **Real Example:** ``` Entry Call Price: $3.50 Current Call Price: $4.90 Profit %: ($4.90 - $3.50) / $3.50 = 0.40 (40%) Result: 0.40 >= 0.40 βœ“ HIT β†’ SELL IMMEDIATELY (lock in gains) ``` --- ### Signal 2.2: Stop Loss Triggered **Trigger Parameters:** ``` (Current Call Price <= Entry Call Price Γ— 0.80) AND (Days Held >= 7) (Call value down 20% or more, after 7+ days) ``` **Exact Calculation:** ``` entry_call_price = price_when_bought current_call_price = current_market_value days_held = today - entry_date loss_pct = (current_call_price - entry_call_price) / entry_call_price IF loss_pct <= -0.20 AND days_held >= 7 THEN β†’ SELL IMMEDIATELY β†’ Cut this loss ELSE β†’ Hold (too early or not at stop yet) ``` **Real Example:** ``` Entry Date: 2026-01-23 Today: 2026-02-15 (23 days held) Entry Call Price: $3.50 Current Call Price: $2.60 Loss %: ($2.60 - $3.50) / $3.50 = -0.257 (-25.7%) Check: -0.257 <= -0.20 βœ“ AND 23 >= 7 βœ“ Result: BOTH CONDITIONS MET β†’ SELL IMMEDIATELY (cut loss) ``` --- ### Signal 2.3: Time Decay (Expiration Approaching) **Trigger Parameters:** ``` Days Until Option Expiration < 14 days (Less than 2 weeks left) ``` **Exact Calculation:** ``` expiry_date = option_expiration today = current_date days_to_expiry = (expiry_date - today).days IF days_to_expiry < 14 THEN β†’ SELL IMMEDIATELY β†’ Avoid theta decay in final 2 weeks ELSE β†’ Can hold (theta decay is minimal) ``` **Real Example:** ``` Option Expiration: 2026-06-18 Today: 2026-06-10 Days to Expiry: 8 days Result: 8 < 14 βœ“ β†’ SELL IMMEDIATELY (avoid decay) ``` --- ### Signal 2.4: Early Profit Taking (30-50% Gains) **Trigger Parameters:** ``` (Call value up 30-50%) AND (Position is strong) (Optional - harvest gains before 40% target) ``` **Exact Calculation:** ``` profit_pct = (current_call_price - entry_call_price) / entry_call_price stock_momentum = still_in_uptrend? IF 0.30 <= profit_pct < 0.40 AND stock_momentum == strong THEN β†’ CAN SELL (optional harvest) β†’ Lock in gains, redeploy capital ELSE IF 0.30 <= profit_pct < 0.40 AND stock_momentum == weak THEN β†’ CONSIDER SELLING (position weakening) ELSE β†’ Hold (still building position) ``` **Real Example:** ``` Entry Call Price: $3.50 Current Call Price: $4.55 Profit %: ($4.55 - $3.50) / $3.50 = 0.30 (30%) Stock Momentum: Still strong, uptrend intact Result: 0.30 <= 0.30 < 0.40 βœ“ AND strong βœ“ β†’ CAN SELL if you want quick profit β†’ Or hold to +40% if momentum continues ``` --- ## Exit Signal Priority When multiple signals trigger, follow this order: ``` 1. PROFIT TARGET (42%) ← Always sell (highest priority) 2. STOP LOSS (20%) ← Always sell (cut losses) 3. TIME DECAY (<14 days) ← Always sell (avoid decay) 4. EARLY PROFIT (30-50%) ← Optional (redeploy or hold) ``` --- ## SECTOR SIGNALS (Purge Signals) ### Signal 3.1: Sector Purge Trigger **Trigger Parameters:** ``` 3 or more losing positions in same sector ``` **Exact Calculation:** ``` for each sector: losing_positions = count(positions where pnl < 0) IF losing_positions >= 3 THEN β†’ SECTOR PURGE SIGNAL β†’ EXIT ALL positions in that sector ``` **Real Example (Cannabis Sector):** ``` Sector: Cannabis Positions: ACB: -$12,600 (loser) βœ— CGC: -$17,836 (loser) βœ— CRON: -$10,043 (loser) βœ— TLRY: -$36,316 (loser) βœ— Losing Count: 4 >= 3 βœ“ Result: SECTOR PURGE TRIGGERED β†’ EXIT ALL 4 positions immediately β†’ Exit on same day (don't stagger) ``` --- ## REBALANCE SIGNALS (Portfolio Allocation) ### Signal 4.1: Account Allocation Drift **Trigger Parameters:** ``` Any asset class drifts > 5% from target ``` **Target Allocation:** ``` Call Options: 46% (target) SPY Hedge: 45% (target) Cash Buffer: 9% (target) ``` **Exact Calculation:** ``` current_allocation = (current_value / account_value) * 100 target_allocation = [46%, 45%, 9%] drift = |current_allocation - target_allocation| IF any drift > 5% THEN β†’ REBALANCE SIGNAL β†’ Adjust allocation back to target ``` **Real Example:** ``` Account Value: $4,000,000 Current: Calls: $2,100,000 (52.5%) Target: 46% Drift: +6.5% βœ— OUT OF RANGE SPY: $1,600,000 (40.0%) Target: 45% Drift: -5.0% βœ— OUT OF RANGE Cash: $300,000 (7.5%) Target: 9% Drift: -1.5% βœ“ OK Result: REBALANCE TRIGGERED β†’ Sell some calls to reduce to 46% β†’ Use proceeds to buy SPY to raise to 45% β†’ Top up cash to 9% ``` --- ## Summary: All Parameterized Signals ### ENTRY SIGNALS (Need 5/5) ``` 1.1: Price > SMA_20 βœ“/βœ— 1.2: Volume > 1.5x average βœ“/βœ— 1.3: Breakout above 5-day high βœ“/βœ— OR 1.4: Pullback 2-3% within uptrend βœ“/βœ— 1.5: Price > SMA_20 > SMA_50 βœ“/βœ— ``` ### EXIT SIGNALS (Any one triggers) ``` 2.1: Profit target +40% βœ“ β†’ SELL 2.2: Stop loss -20% (after 7d) βœ“ β†’ SELL 2.3: Time decay <14 days to expiry βœ“ β†’ SELL 2.4: Early profit 30-50% (optional) βœ“ β†’ CONSIDER ``` ### SECTOR SIGNALS (Any one triggers) ``` 3.1: 3+ losses in same sector βœ“ β†’ PURGE ALL ``` ### REBALANCE SIGNALS (If triggered) ``` 4.1: Account allocation drifts >5% βœ“ β†’ REBALANCE ``` --- ## Implementation Examples ### Example 1: Real Entry Decision **Stock**: RCL **Today**: 2026-08-20 **Check Entry Signals:** ``` 1.1 Price > SMA_20? Current: $95.50, SMA_20: $93.20 Check: $95.50 > $93.20 βœ“ 1.2 Volume > 1.5x? Today: 2,400,000, Avg: 1,000,000 Check: 2.4x > 1.5x βœ“ 1.3 Breakout? Recent High: $93.00, Current: $95.50 Check: $95.50 > $93.00 βœ“ 1.4 Pullback? Recent High: $96.00, Low: $93.60 Pullback: ($96-$93.60)/$96 = 3.5% Check: 2-3% range? NO (too deep) βœ— But Breakout signal satisfied βœ“ 1.5 Bullish MA structure? Price: $95.50, SMA_20: $93.20, SMA_50: $92.00 Check: $95.50 > $93.20 > $92.00 βœ“ RESULT: 4/5 signals (acceptable) β†’ ENTER POSITION Size Calculation: - Account: $4,000,000 - Target %: 8% - Position $: $320,000 - Call Price: $3.50 - Contracts: $320,000 / $3.50 = 91,428 contracts - Actual Contracts: Round to 90,000 Entry: - Symbol: RCL - Contracts: 90,000 - Call Price: $3.50 - Cost: $315,000 - Entry Date: 2026-08-20 - Expiry: 2027-02-20 (6 months) ``` ### Example 2: Real Exit Decision **Position**: Same RCL from above **Today**: 2026-09-20 (30 days later) **Check Exit Signals:** ``` Current Stock Price: $105.50 Current Call Price: $5.25 Entry Call Price: $3.50 2.1 Profit target +40%? Gain: ($5.25 - $3.50) / $3.50 = 50% Check: 50% >= 40% βœ“ YES 2.2 Stop loss -20%? Loss: N/A (we're up 50%) Check: NO βœ— 2.3 Time decay <14 days? Days held: 30, Days to expiry: 150 Check: 150 < 14? NO βœ— 2.4 Early profit 30-50%? Gain: 50% Check: 30-50% range? YES βœ“ RESULT: EXIT SIGNAL 2.1 HIT β†’ SELL IMMEDIATELY Exit: - Symbol: RCL - Contracts: 90,000 - Exit Call Price: $5.25 - Proceeds: $472,500 - Realized Gain: $157,500 - Exit Date: 2026-09-20 - Days Held: 30 ``` --- ## Signal Automation Checklist Use this checklist to verify all signals are coded: ``` ENTRY SIGNALS: [ ] Signal 1.1: Price > SMA_20 [ ] Signal 1.2: Volume > 1.5x average [ ] Signal 1.3: Breakout above 5-day high [ ] Signal 1.4: Pullback within 2-3% [ ] Signal 1.5: Price > SMA_20 > SMA_50 EXIT SIGNALS: [ ] Signal 2.1: Profit +40% [ ] Signal 2.2: Loss -20% (after 7 days) [ ] Signal 2.3: <14 days to expiry [ ] Signal 2.4: Early profit 30-50% SECTOR SIGNALS: [ ] Signal 3.1: 3+ losses in sector REBALANCE SIGNALS: [ ] Signal 4.1: Allocation drift >5% ``` --- **These signals are completely parameterized and can be automated.** They are NOT subjectiveβ€”they have exact numerical thresholds. Generated: August 20, 2026 Source: Scott's trading data + pattern extraction