incredible...now figure out and observe why this trade reversed well...try to fine tune it and identify these situations...
good Job...
good Job...
Please..help w/ risk mgmt!!
- Thread starter slickshal
- Start date
I guess it applies only to day trading. With swing trading, because of huge gaps overnight, stop orders just do not work. Ask anybody long NFLD yesterday nigth. They wake up with a nice haircut of above 50% ! The only way to overcome those big gaps is to have a limited amount of capital invested in one single stock.
It's common sense. When long, for you to make money, YOUR low has to occur before "your" high. Same holds true for the underlying price and all parties involved during a trading session.
Alternatively, let's say a stock gaps UP. At that pont, the low has been made first (using the prior night's close as the surrogate/ reference point).
From that moment there are two eventual outcomes
1. The gap holds and continues UP (LMF)
2. The gap fades, fills, and heads lower (HMF)
Or. with a gap down open:
1. It continues down (HMF)
2. The gap reverses (most likely the ax picked up inventory he will now advance) and price moves ABOVE the gapped down open . ( LMF).
Flat opens are self-explanatory.
Simply put (no pun) , a short seller looks for a HMF. Well, at least he should (which is why short sellers have a high mortality rate).
Obviously the transition from LMF to HMF or vice versa doesn't neessarily occur in the morning (yet alone near the open). That relates to the flavor of the thread and your proposed stops. For example you may have a scalping profit but if the day's LMF and changed to HMF. you want to be looking for a gracious exit.