Investing: Equities

Status: Scaffolded - Content pending Last Updated: 2025-12-11

How Equity Investing Works

When you request an INVESTMENT trade on a STOCK, the algorithm analyzes 2 full years of daily data to identify long-term trends and optimal entry points.

Data Collection

Data Type	What We Get
Current Price	Real-time snapshot
Historical Bars	730 days (2 years) of daily candles
Bars to AI	60 most recent daily bars (~3 months)
Indicators	RSI(14), EMA(9,20), SMA(50,100,200), MACD
Market Context	SPY, QQQ, VIX direction

Analysis Flow

1. Data Collection (2 years, daily bars)
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2. Technical Agent analyzes:
   - Major trend (above/below 200 SMA)
   - Key support/resistance (1-3 month swings)
   - 52-week high/low
   - All-time high/low
   - Long-term patterns
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3. Macro Agent checks:
   - Market regime (bull/bear market)
   - Sector rotation
   - Economic cycle position
   - Interest rate environment
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4. Wild Card Agent checks:
   - Earnings calendar (quarterly)
   - Major economic releases
   - Company-specific catalysts
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5. Supervisor synthesizes:
   - Entry zone
   - Stop loss (1.5-2x ATR)
   - Targets (based on resistance)
   - Position size
   - NO time stop

Entry Methodology

Investment Entry Process:

1. Confirm Long-Term Trend — Is price above 200 SMA?
2. Wait for Pullback — Don't buy at all-time highs
3. Enter at Major Support — 50 SMA, 100 SMA, key levels
4. Position Size Conservatively — Wider stops mean smaller positions
5. Plan for Drawdowns — Accept that 10-15% drawdowns happen

Position Sizing (ATR-Based)

ATR = Average True Range (14-day)
Stop Distance = 1.5 to 2x ATR
Risk Amount = Account Size × Risk Percent
Shares = Risk Amount ÷ Stop Distance

Example:
- Account: $100,000
- Risk: 1% = $1,000
- Stock price: $150
- ATR (14-day): $3.50
- Stop: 2x ATR = $7.00 below entry
- Shares: $1,000 ÷ $7.00 = 142 shares

Exit Rules

Condition	Action
Price hits Target 1	Exit 50% of position
Price hits Target 2	Exit remaining 50%
Price hits Stop Loss	Exit 100%
NO TIME STOP	Hold until price dictates

Key Difference: Investments have no time stop. Price action determines exit.

Key Levels for Investment Entries

Level	Significance
200 SMA	Bull/bear market divider
100 SMA	Major trend support
50 SMA	Intermediate support
52-Week Low	Major support zone
Previous ATH	Psychological resistance

The 200 SMA Rule

For investments, the 200 SMA is critical:

Price vs 200 SMA	Interpretation	Action
Above	Bull market	Look for LONG entries
Below	Bear market	Caution on LONGs
Crossing above	Potential trend change	Wait for confirmation
Crossing below	Potential trend change	Tighten stops

What the Trade Plan Looks Like

Direction: LONG
Entry Zone: $145.00 - $148.00 (50 SMA support + prior breakout level)
Stop Loss: $138.00 - $140.00 (2x ATR below entry = ~$7)
Target 1: $165.00 - $170.00 (52-week high area, 50% of position)
Target 2: $180.00+ (new highs, remaining 50%)
Time Stop: NONE (hold until price action dictates)
Position Size: 140 shares
Max Risk: $1,000 (1% of account)
ATR (14-day): $3.50

Investment Equity Checklist

Before entering:

• Price above 200 SMA (uptrend)
• Clear pullback to support
• Macro environment supportive
• Sector in favor
• No immediate earnings (unless planning to hold through)
• Position sized for ATR-based stop