The daily short setup the indicator gave us in our last idea triggered a short trade which we are still in (3). It’s the first trade the indicator entered us in since the end of August on . The trade setups (1) and (2) missed the trigger level by just a tick. You may have been triggered here, in that case you took two small losses of less than 2%, which is reasonable 🙂
Now let’s look at managing this short trade: finding areas of interest and looking for the indicator signals at those levels.
First of all, the indicator hasn’t shown any exhaustion signals, so we should be still good on momentum to the downside.
However, we’ve dropped violently and are reaching a which I’ve talked about before (4). It’s the area between 5000 and 4500, taken from the untested high of September last year.
What we look for are exhaustion signals in or around that area, and reversal candles. According to the strategy we tighten the stop loss when we see those. The indicator still shows the technical stop loss at (5), but as the move down was quite violent, and the candles being quite overextended it’s smart to move the stop down to either swing high (6) or if you;re even more cautious to the middle of big candle (7). Remember, you can always re-enter a position, managing the risk is more important than exiting at the absolute maximum profit.
The indicator plotted a new short setup (8) which was triggered today. It’s not a trade I took, as I was in short already, but it is a signal, which definitely could have been taken. The stop loss for that entry is at the prior swing high (6).
From here a number of things can happen, and although there are differences in probabilities, we have to keep in mind that markets are inherently unpredictable. The mindset of a trader should not be having a scenario or prediction of what may happen, and hoping that that scenario will come true (or holding on to that prediction for dear life…). Rather, you should want be mindful of the different scenarios, and have a game plan for all of them. Every new candle gives you new information to base your decision on, use it!
In this case we have an area which we suspect the market should reach. But again, anything can happen so here’s the plan:
If we go down the the (4), we wait for the indicator to signal overextension and look for reversal candles to lower the stop loss to the top of the candle (as per the strategy).
Then we re-evaluate and wait for the market and indicator to show us a new trade.
If the market reaches (4) but crashes through, we’ll still be in the short. We’ll move the stop loss down according to the levels the indicator plots. And perhaps we will get a re-entry signal on the way down to reinforce the position.
If the markets decides to reverse from here we have our stop loss at either (6) or (7). We’ll be stopped out, and re-evaluate, waiting for the indicator to show us new trade opportunities.
If we move sideways, same thing: we either get stopped out and re-evaluate, or we remain in our short until the market hits our stop loss or moves down to the .
We have our plan set out, so now it’s the market turn to make it’s move…
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Published at Mon, 19 Nov 2018 16:04:52 +0000
