Question driving me mad

[darkhorse70]

Hey everyone, got a quick question which I cant seem to figure out. Hypothetically I enter a position and have a planned tartegt. It gets 70% of the way there then I get stopped out because of a trail stop. Now obviously if I re enter the trade the R/R are worse off in my favour if we still risk the same amount. Now the question is do we take the attitude that we are currently in a trade and have no risk or do we take on the assunption thay every time we re enter a trade that we must re asses a new R/R and that this new trade carries a new risk.

Its driving me more nuts as its very close to an all time high and we cant really estimate the potential reward of a possible break out and by waiting for a new break oit might mean to miss a good explosive run.

Thanks

 

[pixel]

Hey everyone, got a quick question which I cant seem to figure out. Hypothetically I enter a position and have a planned tartegt. It gets 70% of the way there then I get stopped out because of a trail stop. Now obviously if I re enter the trade the R/R are worse off in my favour if we still risk the same amount. Now the question is do we take the attitude that we are currently in a trade and have no risk or do we take on the assunption thay every time we re enter a trade that we must re asses a new R/R and that this new trade carries a new risk.

Its driving me more nuts as its very close to an all time high and we cant really estimate the potential reward of a possible break out and by waiting for a new break oit might mean to miss a good explosive run.

Thanks

Hi D'Horse;

Does it really matter? What is more important: A principle of "What do I consider a new trade, and what is a continuation?" or the potential profit if the "explosive run" materialises?

I consider a premature exit a corrigible mistake. As soon as I recover my senses, I correct it - usually by buying the same number of shares back, The hiatus between first and second session may cost a pip of profit, but we're still in profit, aren't we?!
If you have the time, and feel you need it for peace of mind, adjust your original entry price by the gap you lost in the middle of the trade - if in fact there was a gap. Otherwise, concentrate on the next move and get out when the next leg comes to an end.

Phil Carret may have had longer-term investments in mind when he penned the maxim quoted below; but I find the principle just as valid, regardless whether I trade a swing for a few minutes or a long drawn-out trend: If I mistook a brief pullback for a break of trend, I get back on the ride and continue as long as...

http://rettmer.com.au/TrinityHome/Trinity/Musings.htm#onshareprices
A piece of advice from Phil Carret’s The Art of Speculation:
If you have 1000 shares of a stock worth currently, say, $9, disregard entirely the price you paid for it. Rather ask yourself this question: “If I had $9,000 cash today and wished to buy some security, would I choose this stock in preference to every one of the thousands of other securities available to me?”
If the answer is strongly negative, sell the stock! It should not make the slightest difference whether the stock cost you $5 or $13.
Your entry price is totally irrelevant, but the average punter gives it considerable weight.

 

[darkhorse70]

Thanks pixel. That makes perfect sense.

 

[AussieMatt]

Hey everyone, got a quick question which I cant seem to figure out. Hypothetically I enter a position and have a planned tartegt. It gets 70% of the way there then I get stopped out because of a trail stop. Now obviously if I re enter the trade the R/R are worse off in my favour if we still risk the same amount. Now the question is do we take the attitude that we are currently in a trade and have no risk or do we take on the assunption thay every time we re enter a trade that we must re asses a new R/R and that this new trade carries a new risk.

Its driving me more nuts as its very close to an all time high and we cant really estimate the potential reward of a possible break out and by waiting for a new break oit might mean to miss a good explosive run.

Thanks

I'm assuming if you get stopped out from a trail stop then the trade is over as the trail is your most logical exit strategy at that point given the scenario? If you have game planned all aspects of the trade and the trail stop is an aspect of that plan then to me the trade is over, you can reassess a new setup at that point but it would in my opinion need to be based solely on the situation at that point irrespective of the original target/trade you had in mind which is now over.

Adding to a winning trade is different again, in that situation I would consider it the same trade as it is still open.

Do you have a chart in particular you are having difficulties determining a target on? post it and I will take a look at some logical options.

 

[darkhorse70]

Matt ill post the charr once I get to my dads work today as it is on his comp. I just put a trailing stop to lock In profits if the stock suddenly starts to free fall as it is near an all time high. Its related to SEK. Its more of a security method but it ses to bounce back from its relatively newly established support lvl.

Ill explain it on the photo when I post the pic up. Thanks

 

[darkhorse70]

Atm im thinking abit cleaer. Im going with the presumption that I am still in the same initiall trade and in a profit so I can risk losing some money and still have zero risk. Although the reward is limoted the odds of the run going long are greater than going short.

I say this because the more significant trendline is upwards with it close to the current price. It looks as though overhanging aupply had been absorbed. The current overall markets are long. Fundamentally im assuming its a decent company with good results.

These factors outweight the negative ones. Im also in a good entry point in my second entry. Hence I feel pretty comfortable and also if prices do breakout above there high which is only about 5% away, proces the last two times with similar patterns have run 50-100% in months.

 

[darkhorse70]

Oh yeah and its short term trendline (weeks-months) was broken with a pickup in trading volume

 

[pixel]

Oh yeah and its short term trendline (weeks-months) was broken with a pickup in trading volume

Gotcha - assuming we're talking the same stock:



My signals said Buy @ $16.50; the long red candle on the 20th had me worried, but the Close kept me in.
Resistance $17.73 set the protective profit stop; Buy back in IF that resistance is broken. That would increase the target to $18.50+; and I'd definitely count that as a single trade, albeit a multi-step one.

 

[darkhorse70]

Hey Pixel thats the one. I actually bought in on the 8th of Aug at $16.15 just because I didnt want to lose out on a possible break out. I sold out on the way TWICE. i MISSED A CHUNK FROM 17$ TO 17.50 BUT RE BOUGHT IN AT 17.55. Currently ive set my stop loss at 17.45 just below the support level. These 2 photos are a few days old but.

But im aiming for $18.20 and hopefully a possible breakout.

 

[darkhorse70]

I just assumed that the long red candle was people getting out of trapped positions. I thought it was better to get rid of them and then there would be less resistance on the next way up. Is that incorrect ?

 

[pixel]

I just assumed that the long red candle was people getting out of trapped positions. I thought it was better to get rid of them and then there would be less resistance on the next way up. Is that incorrect ?

I didn't know why people would sell when they did; if a share gaps up early in the morning, it's usually a sign that some optimists are taken for a ride. That was followed by what could easily have been a stop raid. On days like that, my main concern is Where does it close? The Close is usually set by Professionals.

 

[AussieMatt]

With pattern breakout's I would simply use logical levels of S/R to manage my stop (as it appears you are doing) or a trend line trail if we are given a pull back aspect after the break. If the Pattern is solid with clearly respected trend lines (SEK is a bit iffy IMHO) then it does not really need to be complicated just watch price at these key levels and make the most logical decision. Price is currently at key resistance, if it breaks that is great now it may become support if it does not you are already actively protecting your capital logically so no much else to do besides take some off or just watch to see if it pops through.

 

[AussieMatt]

I didn't know why people would sell when they did; if a share gaps up early in the morning, it's usually a sign that some optimists are taken for a ride. That was followed by what could easily have been a stop raid. On days like that, my main concern is Where does it close? The Close is usually set by Professionals.

I have less experience with equities as I mainly trade FX but if there is a strong S/R level that price has been testing over time that we cannot break out of and price gaps heavily through this level I have found a good play is to trade back to that level to ensure it was a true breakout. If a level cannot be breached during the higher volume period of an active market an off market gap heavily through that level does not make sense to be a true breakout of that level, just an observation from FX Gap dynamics I have watched, this may have been a similar situation with SEK..

 

[darkhorse70]

Makes sense pixel.

Thanks for the feedback matt. Appreciated.

 

[noirua]

Hmmm, driving you mad, or is there an answer: http://i.imgur.com/JDssSme.jpg

 

[cynic]

Hmmm, driving you mad, or is there an answer: http://i.imgur.com/JDssSme.jpg

After looking at this one several times, I think that the exposed portions of the legs (below the knee) may have been swapped to create this illusion.

 

[ThingyMajiggy]

After looking at this one several times, I think that the exposed portions of the legs (below the knee) may have been swapped to create this illusion.

I think his shorts are just white and blue/black