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
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
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.