What is Smart_Trade's method?
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Quote:
Originally Posted by balasoft80
Hi ST,
Could you please share some insight on when and where to reverse the order. I am not sure whether this has been covered somewhere in the thread. Please share some high level points when your time permits.
Here are couple of points I can think about now. Please correct it if it wrong
1. Going long/short at lower/top level and having SL at high or low of the day. In case of SL trigger I think we can reverse order
2. Consolidation breakout/breakdown
Here is an example. Hope it helps for beginner like me
Aban:
Price consolidated for an hour with in 1.5 rs. So we put sell order just below of consolidation and buy order above consolidation. So now price breaks lower side and buy order now become a SL.
Novice Trader 1:
They look to price move downside which did not happen and when the price nearing the SL, just they will cancel the SL order and they look short every rise to average the price.
Novice Trader 2:
They look to price move downside which did not happen and triggered the SL. Now their mind just think about the loss and they will never look for the other opportunity.
Professional Trader:
They look to price move downside which did not happen. Now they know that it's breakdown failure. They change the SL order quantity to 2X. When it hits SL, short would be covered and buying would be initiated.
Day Ends:
Novice Trader 1 : Due to averaging they lost some huge amount from capital
Novice Trader 2 : they lost 2 rs per share
Professional Trader: 10-2 = 8 rs profits.
As a day trader we should know when and where to stop and reverse the order
Bala,
As we all know trading is a game of probabilities. There is nothing definite or certain in trading . As a trader we should be aware and accept that market can do anything. It has no obligation to go as per our analysis or as per our trade direction.
In addition to the three possibilities mentioned above by you , there is a fourth and the best way of handling this breakout failure.
When the sideways range broke on the downside,we took a short trade. The same bar closed within the sideways range showing a failure. The next bar is a green candle....so get out of short positions. Now wait with no position. Either the market will make another attempt to break the low so now we will take a short position below the red failure bar low. But in 70-80 % cases the market will breakout on the upper side. So the moment it breaks out on the upper side, you go long , thereby saving most of the the amount you will loose in the stoploss. Remember that breakout failures set up very good trades in the opposite direction and that is what the market did...
Happy Trading.
Smart_trade
