The Momentum Traders — Trading Rules
As at June 2026 | System: themomentumtraders.com
1. MARKET CONDITION FILTER (runs before anything else)
- The S&P 500 is compared to its 20-day Moving Average daily
- GREEN — S&P 500 is >0.5% above its 20-day MA → up to 5 new trades permitted
- AMBER — S&P 500 is within ±0.5% of its 20-day MA → maximum 3 new trades, strong confidence picks only
- RED — S&P 500 is >0.5% below its 20-day MA → no new trades at all
2. RADAR SCAN — Hard Entry Filters (radar.py)
All of the following must be true for a stock to qualify:
- Minimum data: at least 150 bars of price history available
- Price above 50-day MA ✓
- Price above 200-day MA ✓
- 50-day MA above 200-day MA (golden cross territory) ✓
- 20-day momentum: between +5% and +18% (strong but not exhausted)
- RSI (14-period): between 45 and 68 (trending, not overbought)
- Relative volume: today’s volume must be at least 1.2× the 20-day average
- Minimum absolute volume: 500,000 shares/day (US) or 200,000 shares/day (UK)
- ATR% volatility: must be below 3.0% (US) or 4.0% (UK)
- ATR% vs own baseline: current ATR must not exceed 1.5× its own 60-day average (rejects unusual volatility spikes)
3. COMPOSITE SCORING (radar.py)
Stocks passing all hard filters are ranked by a composite score (max 100):
| Factor | Best Score | Criteria |
|---|---|---|
| Momentum | 30 pts | 10–14% scores highest; extremes penalised |
| RSI Quality | 30 pts | 55–65 scores highest |
| Relative Volume | 25 pts | ≥2.0× scores highest |
| Distance above 50-day MA | 15 pts | 2–8% above scores highest; overextended penalised |
- Top 10 by composite score are passed to the AI filter
4. AI FILTER — Stock Selection (claude_filter.py)
- Claude AI receives the top 10 candidates with scores, momentum, RSI, volume, and recent news headlines
- Claude selects the best 5 / 3 / 0 stocks depending on market condition (GREEN / AMBER / RED)
- Selection criteria applied by AI:
- Sector diversity — no more than 2 stocks from the same sector
- Momentum quality — prefers mid-range (10–15%), avoids extremes
- RSI health — prefers 52–65; avoids anything above 66
- Volume conviction — favours higher relative volume
- News context — rejects one-off events (earnings surprises, short squeezes, rumours); prefers no news (quiet accumulation) or structural positives (contract wins, upgrades)
- No portfolio overlap — will not select a ticker already held
- Risk spread — aims for a mix of US and UK stocks where possible
- Each selection is tagged: STRONG, MODERATE, or SPECULATIVE
- If the AI fails, a fallback selects top stocks by composite score
5. TRADE ENTRY — Pending Trigger System
- Each selected stock is set to PENDING status with an allocated amount of £2,000 per trade
- Trigger price = scout price × 1.01 (must break 1% above the scout price to activate)
- If the trigger is not hit within 20 hours, the trade is cancelled automatically
- Maximum 5 positions held simultaneously
6. STOP LOSS & TRAILING STOP RULES (portfolio_tracker.py)
Default Stop (before any meaningful gain)
- Hard stop at -2.5% from entry price
Tiered Trailing Stops (activated once stock gains)
| Peak Gain Reached | Trailing Stop Applied |
|---|---|
| +5% to +9.9% | Trail at 4% below peak |
| +10% to +19.9% | Trail at 6% below peak |
| +20% or more | Trail at 4% below peak |
Profit Lock Floor (activated after 15+ trading days)
| Peak Gain Reached | Minimum Exit Floor Locked In |
|---|---|
| +15% to +19.9% | Floor locked at +10% from entry |
| +20% to +24.9% | Floor locked at +15% from entry |
| +25% or more | Floor locked at +20% from entry |
7. TIME-DECAY RULE
- If a trade has been active for 7 trading days and the current gain is below +2%, the position is automatically closed
- Outcome logged as: TIME-DECAY
8. AI ANALYSIS AT +15% (portfolio_tracker.py)
- When an active trade reaches +15% gain, Claude AI is called once to assess the move
- AI reviews recent news headlines and price action context
- AI returns a verdict: GENUINE or TEMPORARY, with a confidence score
- Possible AI-triggered actions:
- TAKE_PROFIT (if confidence ≥75%) → position closed immediately
- TIGHTEN_STOP (if TEMPORARY verdict, confidence ≥70%) → peak price reset to current price, tightening the trail
- WIDEN_STOP → no change, trail continues as normal
9. TRADE EXIT — Outcome Categories
| Outcome | Trigger |
|---|---|
| HARD-STOP | Hit stop loss at -2.5% from entry |
| TRAILING-STOP | Trailing stop triggered (peak gain was ≥5%) |
| TAKE-PROFIT | AI recommended exit at +15%+ |
| TIME-DECAY | 7 days active, gain still below +2% |
10. PORTFOLIO & CAPITAL RULES
- Starting capital: £10,000
- Max allocation: £2,000 per trade
- Maximum 5 simultaneous open positions
- Available cash is tracked in real time; trades are skipped if cash is insufficient
- Both US (S&P 500) and UK (FTSE 100) stocks are scanned
11. AUTOMATION SCHEDULE
market_chart.py— fetches S&P 500 / Nasdaq data and updates the market condition JSONradar.py— scans all tickers and writes top 10 to databaseclaude_filter.py— AI selects best picks and creates PENDING tradesportfolio_tracker.py— checks all active trades, applies stops, closes where triggered- All scripts run via cron jobs on the cPanel server
- Dashboard available at themomentumtraders.com (WordPress plugin shortcode)
Document generated June 2026 — review after accumulating meaningful trade data