Trade Management - Fast Movers

[pavilion103]

I have found that one of the biggest challenges is trade management of fast movers.

I particularly find it challenging when the stock gaps up with an ultra wide spread bar.

I have created this thread to discuss ideas on how to trade these types of movements. Please no comments about how everyone's exits will be different based on their own strategies - no joke! Rather, it would be good to discuss different ways to trade these based on experience and also out of interest.

I have selected SYR to discuss which is one most are probably familiar with.

The trade is a hypothetical best case scenario so whether entry here is likely or not is not relevant to this discussion. Assume that entry of this trade has occurred.

Entry - 0.96
Stop loss - 0.82
14.6%

SYR - entry.png

All of a sudden price gaps up. The price is now at $1.82 and our profit is up to 6R!!!

A couple of things to consider:
1. Do we take profit immediately
2. Where do we trail the stop (i.e. how much are we willing to give back).
Do we move the stop up to, say 50% retracement of the bar? or below the bar to give it room to move?

SYR - May (day1).jpg

The next day price moves up very slightly on still huge volume but closing near the low. Is this a warning sign to exit immediately? Do we trail stop below the low?
Over the next few days price falls on lower volume and then pushes higher on decreasing volume, struggling to penetrate the previous high.

Price is now up to $2.15 and profit at 8.4R.

One way to trail the stop here would be to place it below the low of the lower volume down bar at $1.78. This would mean a locked in profit of 5.8R. Is this too much to give back or just the cost of doing business.

How much of the 8.4R profit would people be willing to risk for higher moves?

SYR - May (no demand).jpg

Lastly price shoots up on a huge gap up day. Price closes in the middle third of the bar. Is there some supply.
Price is now $2.80.
Profit is 13.1R

A few options. Which one do we take?

1. Take 13.1R profit.
2. Trail stop below low of today's bar: 12R profit
3. Stop just below the gap: 10.4R profit
4. Other

SYR - May12.jpg


I do not have much experience trading these types of moves so any input would be fantastic.

The main point to discuss is:

How much profit are we prepared to put at risk for the chance of further moves?

In the case of the last two days moves it looks like it was worth risking a bit. Although of course hindsight is 20/20.

[CanOz]

Pav, there are tons of ways to exit a trade. IMO i think its best with a rule based system to just be consistent. Better if it testable as well. One way though, is to use a trendline. 1 Close below a TL and your out.

CanOz

[tech/a]

PAV

The challenge of discretionary trading.
After the wide spread break out bar I'm looking at any close below th close of THAT bar.
If price trades below 50% of the impulse bar I'll close it out no question.
Next I'm looking at volume
Next pattern
Second breakout we are doing it all again

If I'm trading this chart and this bar my trailing stop is trading below the gap
Or a close below the current low as this bar is a lot shorter volume is a bit high so there is supply around.
Will take a look tomorrow ----

If I'm stopped out with my close rule then I place a buy a tick above the last high.

That's my simple discretionary method

[Gringotts Bank]

I also like the idea of trendlines. SYR stuck to the lines perfectly today, both its upper and lower limits. Make sure you use a log scale.

[CanOz]

This would be testable, Parabolic SAR. Same as Tech/A mentioned though, it would require multiple entries. I like the way its easy to visualize though. You could also take off half the position and trade the remainder with Trendlines.

CanOz

[pavilion103]

Multiple entries isn't something I'd considered in great depth.

Because my initial stop to entry gap was so small I was thinking that if I did ride it all the way up my profit would be greater than multiple trades. Although there is a huge risk I could give most of it back which isn't intelligent (and not something I'd be willing to risk).

Personally, in that example, I would have been out before the 'second breakout.' When price struggled to move on high volume the day after the first breakout, I would have had my stop very close, if I was even in the position at all.

I guess the other thing that can complicate getting back into a trade is when it gaps up and the only way to benefit from that move is to already be in the trade.


This is all something that I have to figure out in conjunction with my system and its expectancy and distribution of wins/losses. I am doing a lot of testing on this in particular.

[pavilion103]

I'm not sure if this works in practice but this is one idea that I have when considering the scenario where price shoots up on a wide bar closing near the high:

Trail the stop loss very very close to the close (between 1-3 ticks below the close). If it shoots up the next day then I have the benefit of that move (still being in the trade with the initial tighter stop - high R:R potential).

If I am stopped out then I hardly lose any of the profit at all (unless it gaps down). THEN look to re-enter above the high of the wide bar with a new stop in place where I deem appropriate.

Does this capture the best of both worlds? Am I missing something or is this a very good way to approach it?

[tech/a]

I'm not sure if this works in practice but this is one idea that I have when considering the scenario where price shoots up on a wide bar closing near the high:

Trail the stop loss very very close to the close (between 1-3 ticks below the close). If it shoots up the next day then I have the benefit of that move (still being in the trade with the initial tighter stop - high R:R potential).

If I am stopped out then I hardly lose any of the profit at all (unless it gaps down). THEN look to re-enter above the high of the wide bar with a new stop in place where I deem appropriate.

Does this capture the best of both worlds? Am I missing something or is this a very good way to approach it?

In a bullish market ( not this one) I place a SELL order on open.
Once sold I watch.
In a market like now I would have a trailing stop at 50% of the impulse bar.
Once the market opened and if it trades above the high of the impulse bar
I set the trailing stop higher----to the close of the impulse bar.
If stopped I watch.

To place a buy at the high I would need to see consolidation at or above 50% of the impulse bar.
(3 or so bars.) or the same sort of pattern on a 10-15 Min chart. (Perhaps 5 bars)
If I miss it I miss it.
If consolidation occurs below 50% chances are its done for a while---spiking.
Protection of capital is king.
Maximising profit also.

[pavilion103]

Thanks Tech. That clarifies things for me.

I can really see how trade management is where the money is made and lost.

[pavilion103]

And as SYR comes crashing down over the last couple of days we can see how important risk management is.

[pavilion103]

This is one I'd really love to discuss. It is one of the things I am currently testing.

Is it better to exit:
1) Immediately on the reversal bar
2) Placing a stop 1 tick below the reversal bar.

In the particular example below, placing the stop 1 tick below and remaining in the trade lead to a good result but I haven't tested this enough over many trades to make judgement as to whether or not this is the best approach.

CXY.png

CXY2.png

CXY3.png