Hi all,
Trust you all had a good weekend. Today had 3 trades: a loser (-10) then a winner (+10) followed by the net winner (+10) for the day. The last trade is the one I shall show as it has the most interest with an object lesson in price spikes.
We see a sharp spike up which I do not chase, then as it reverses badly into a second spike down I am tempted into a short at 23 after the attempted tiny bounce towards 30 rolls over. Stop at 33 nicely above bounce high but the 1:1 target requires a fresh low so this is a somewhat aggressive momentum play. Happens to work out nicely and I take my +10 at 13 though leaving plenty on the table as the final low challenges 90.
This does not bother me unduly as I am very wary of spikes and generally do not chase them. The first spike is testament as to why - they are often fake plays sucking momentum, volatility & breakout traders in only to reverse or at least have deep corrections that makes them tough to play using a comparatively tight stop. Be wary of spikes.
Of course, this then begs the question of why I took the second spike? Well, it's pretty much my only exception to avoiding spikes - if a first spike is reversed by another the other way, generally the odds of the second one also being a fake sucker play is somewhat reduced. This tilts probabilities in my favour and that is all I can ever ask for - no certainties, just an opportunity that is on average better than random.
Back tomorrow
Trust you all had a good weekend. Today had 3 trades: a loser (-10) then a winner (+10) followed by the net winner (+10) for the day. The last trade is the one I shall show as it has the most interest with an object lesson in price spikes.
We see a sharp spike up which I do not chase, then as it reverses badly into a second spike down I am tempted into a short at 23 after the attempted tiny bounce towards 30 rolls over. Stop at 33 nicely above bounce high but the 1:1 target requires a fresh low so this is a somewhat aggressive momentum play. Happens to work out nicely and I take my +10 at 13 though leaving plenty on the table as the final low challenges 90.
This does not bother me unduly as I am very wary of spikes and generally do not chase them. The first spike is testament as to why - they are often fake plays sucking momentum, volatility & breakout traders in only to reverse or at least have deep corrections that makes them tough to play using a comparatively tight stop. Be wary of spikes.
Of course, this then begs the question of why I took the second spike? Well, it's pretty much my only exception to avoiding spikes - if a first spike is reversed by another the other way, generally the odds of the second one also being a fake sucker play is somewhat reduced. This tilts probabilities in my favour and that is all I can ever ask for - no certainties, just an opportunity that is on average better than random.
Back tomorrow
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