PokerBrat
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I agree with the first part - your stops should be placed where it is obvious that the trade is wrong and away from any noise. And I also agree that you shouldn't move your stops all over the place for no reason.
However, I do think that your ongoing management of a trade should include a regular review to assess whether the trade is still valid and you can justify keeping it open. The reason I asked the question about your strategy for managing this trade is because I think in this trade you missed some obvious signals to close it early.
Here's my tuppence worth:
Initially I wouldn't have taken the trade and my reasons for that are posted previously, so when I look at your trade I am seeing it from a different perspective than you, which you should bear in mind.
If I did take this trade, as I wrote before, I would be very aggressive with how I managed it. I would be looking for early confirmation that I was correct in my read of the chart and look for it to go into profit quickly.
Lets look at what happened over the last two days: you entered Tues morning at 695, price quickly fell to 665, which is great. However, the markets rallied Tues afternoon and the price came back to around 695. That's not a good sign as it shows that the selling pressure couldn't sustain a down day.
So I wake up Weds morning and see that the US markets had a very bullish afternoon after the Fed rate cut and the Asian markets confirmed this overnight. So I know that the FTSE will probably gap up on the open and sure enough LMI opens up a little. Then the price falls to 690, rallies up to over 700 and then falls to 690 again. Then it starts to rally again. At the same time the FTSE is also going up. At this point on Weds morning I would have closed this trade for break even or maybe a small loss, and I had wondered if you would do the same, which is why I asked you about it. Here's why:
The general market sentiment has been bullish for the last couple of days, LMI has stalled at 665 and now it has stalled twice at 690. It is in the process of forming a higher low from the Dec 5th bottom. This tells me that there is no great appetite for selling this stock and the bulls are taking control. The trade has gone into profit but couldn't sustain it and is now showing signs of a bullish rally. The FTSE is going up, so another bullish day will take this trade into loss. Rather than wait for my stop to be hit to confirm that the trade has gone wrong, I would rather close for as little damage as possible and look for another entry signal.
If I am wrong and the stock falls, so be it, I don't lose much if anything. If I am right then I save myself some losses and possibly get a short entry at a better price when the rally runs out of steam.
However, I do think that your ongoing management of a trade should include a regular review to assess whether the trade is still valid and you can justify keeping it open. The reason I asked the question about your strategy for managing this trade is because I think in this trade you missed some obvious signals to close it early.
Here's my tuppence worth:
Initially I wouldn't have taken the trade and my reasons for that are posted previously, so when I look at your trade I am seeing it from a different perspective than you, which you should bear in mind.
If I did take this trade, as I wrote before, I would be very aggressive with how I managed it. I would be looking for early confirmation that I was correct in my read of the chart and look for it to go into profit quickly.
Lets look at what happened over the last two days: you entered Tues morning at 695, price quickly fell to 665, which is great. However, the markets rallied Tues afternoon and the price came back to around 695. That's not a good sign as it shows that the selling pressure couldn't sustain a down day.
So I wake up Weds morning and see that the US markets had a very bullish afternoon after the Fed rate cut and the Asian markets confirmed this overnight. So I know that the FTSE will probably gap up on the open and sure enough LMI opens up a little. Then the price falls to 690, rallies up to over 700 and then falls to 690 again. Then it starts to rally again. At the same time the FTSE is also going up. At this point on Weds morning I would have closed this trade for break even or maybe a small loss, and I had wondered if you would do the same, which is why I asked you about it. Here's why:
The general market sentiment has been bullish for the last couple of days, LMI has stalled at 665 and now it has stalled twice at 690. It is in the process of forming a higher low from the Dec 5th bottom. This tells me that there is no great appetite for selling this stock and the bulls are taking control. The trade has gone into profit but couldn't sustain it and is now showing signs of a bullish rally. The FTSE is going up, so another bullish day will take this trade into loss. Rather than wait for my stop to be hit to confirm that the trade has gone wrong, I would rather close for as little damage as possible and look for another entry signal.
If I am wrong and the stock falls, so be it, I don't lose much if anything. If I am right then I save myself some losses and possibly get a short entry at a better price when the rally runs out of steam.
)
