BPA trading room Q&A: April 21, 2015
I bought above bar 35, going for two times risk, stop below bar 28. Ended up getting out during bar 52. How would you have managed this trade?
Audio duration: 1min 45sec — Scroll down for image
Whenever I see a lot of scalping going on, on a day like today, you can see chop all day long. Traders were making money buying below bars in a bear trend. It’s a bear trend but the bears are not pressing, they’re not getting big breakouts. So the bears are buying at new lows, the bulls are buying at new lows. Likewise, it’s a bear channel, but it’s basically trading range trading.
Trading range trading has three parts, and you always hear the first two parts—buy low, sell high. But the third part is very, very important: Scalp. Buy low, sell high, and scalp. You have to be quick to take profits. If you’re buying for any reason—so if you’re buying the 40 high, 30 high, the 35 high for any reason, and you have a breakout here and it starts to turn down, I think you got to get out.
In general, on a trading range day, if I have two points profit, I always take at least half off. If I can only trade one contract, or if a trader can only trade one contract, I’m going to tell that trader to just take it all off at two points if it’s a trading range day. Until you get a breakout—45—and good follow through. You did not get that 46.
So, in terms of management, had I bought 35 I probably would recommend getting out two points. And if it did not quite get there, then don’t let it come back to below your entry price. I’d get out break even, or below 48. It looks like a lot of the traders got out below 49. How do I know? Look at bar 50. Bar 50’s a big bear bar closing on its low. That tells you that traders sold. Who sold? The bears sold, for one; and then probably more likely the bulls—the bulls who thought correctly that there were probably more buyers than sellers below, changed their mind on bar 50.