Back to present trades-
Held back due to waiting for cash to clear on my intended SDS entry- on Thursday, i chose to go ahead and enter long Friday pm - along with UUP & UVXY-
Of the 3 positions- UVXY has the potential leverage to be a sharp loss or very large gain.
UVXY was as much an at the close trade as it was also perhaps impulsive-
Trading widely volatile price action is perhaps best left to those with plenty of experience, money, and a hand on the trigger. A bit of Buyer's remorse on my part in taking a 50 share position-- Certainly, if it gaps $10.00 - as it easily could- in either direction I could see a decent gain or a substantial loss-.
The Weekly chart i am including suggests some positives for taking the long position-
Primary trend has been down- In August, Price had spiked higher for a few weeks- all
starting with a bullish engulfing weekly bar -on good volume-
This week's closing bar is also a bullish engulfing on high volume and comes off the prior low- essentially a possible dbl bottom.
Since UVXY is based on volatility & market sentiment- This bullish move suggests a bearish sentiment is increasing after some weeks of market rallying- This week of selling has challenged those with long positions in the wider market indexes looking at the return for the Year. SPY has now closed just slightly above it's Jan open, with this week's bar a bearish
drop wiping out the gains of the prior 3 up weeks. Does it also test the August lows?
Posting the weekly chart- UVXY with a view to whether volume and Price bars and trend
are indicative-
I would point out that not all Bullish Engulfing candles lead into major moves higher-
but i tend to be more positive that this week's move- coming off a bounce off the prior downtrend low (DBL Bottom) . This week's positive close indeed occurred with large volume-
Had I been intending to track UVXY as a possible trade -perhaps I would have been proficient enough to have recognized the higher move turn off the daily chart and gotten into this trade closer to the dbl bottom and would have had a well defined Point of Failure and some nice profits at this point- This is acknowledging this as a late entry that likely I should not have taken because I likely cannot justify the amount of the position taken with the potential RISK .
If i find time later this PM, I will look closer at this trade on a daily chart to see where I should have considered an entry- and where do i set my stop for Monday's open. Yes- I failed to consider that stop-level in evaluating taking the entry- That should have been Trade criteria #1 before pushing the Buy Button. I would have likely found that I would have had to reduce the position size to a much smaller potential amount at RISK.
If i want to do some trading psycho analysis- i would likely attribute this trade as a possible reaction to jump in positions as the awaited cash cleared- It's like getting to the Auction late and possibly over bidding on the Buy side- and paying more than what you normally would have intended. It could work out that i will find buyers willing to pay more on Monday- But that will simply be a measure of LUCK -and not a well planned trade.
Checking Out the daily chart - Purchase at the close Friday -50 shares -avg cost incl commission $37.55 at the market close.
A view of the Daily tells me- in hindsight- that i would have had a much better Fill had i been able to execute a day earlier on the initial breakout . Love Hindsight wisdom- it's so accurate!
What looks promising for the trade are the 2 days of substantial moves through the recent base- off the dbl bottom range.
I've included Volume-& OBV red line - as one indicator to study- but i suspect that you find what you seek to believe in when it comes to applying various indicators-
There's likely a good rationale that Volume is necessary to sustain a considerable up move- The time to enter the trade is just ahead of the considerable up move-
UVXY daily chart shows an extremely High volume with a very bullish close Friday-
I will consider this quite Bullish since the close was very near the absolute high, vs a climax volume- where price fails to hold the upper ranges and closes lower on high volume.
My problem with this trade is that this is such a volatile instrument, a "normal" stop loss
is as likely to get taken out on volatility- and since the prevailing trend is one of decline- the odds that this will be a continued reversal of the down trend is presumptuous- but hoped for .
Let me share the reasons this trade- even if it happens to work out in my favor- is a Bad trade on my part.
Account value is $13,000 +/- and if a typical position trade - $2500- $3,000 should use a 2% position Risk Max-
This trade value is $1871- and so it is not even a Full position entry.
A 2% Risk on the account would be 1% = 130.00 and 2% = $260.00- with a possible high Risk to Reward.
Assume I allow a 2% Risk on 50 shares- that would mean each share could lose about $5.00 and be within that 2% range. $5 x 50 shares = $250.00.
That means i would need to set the stop-loss just below Friday's low.
I simply cannot tolerate a $250.00 loss on a single trade-despite the "potential" reward being substantially higher- but quite suspect as it is a counter-trend trade and these have typically been short-lived moves.
I may try to adjust this trade based on pre market data- but i doubt that my schedule will permit that- Although i did find that I can access my trading account during market hours- my work schedule often would not allow that much free time. So i will set up
the trade as follows- I will be selling 1/2 the position at the open, and set a stop-loss for the remaining 25 shares .
Why sell 1/2 at the open? - I'm trading too volatile a product- IF it goes and opens in my favor on a higher move- I capture the gain for 25 shares- If it opens lower,the 25 shares sell at the lower open and my remaining 25 shares will execute at the 2% level.
