I had not been trading for a while as was on vacation. However my winning trades got off to a good start on first entry back into the market on a short trade on oil.
Oil on the daily time frame has been ranging with a bearish bias as lower highs and lower lows have summarised the price action. I had noted that on this particular day when I entered the trade, on the 14 August, the price action had ripped up and was going sideways.
See the chart below showing the price action and my entry on the 5 minute chart.
I traded what I considered at time of entry to be a reversal. What made me consider that price had now started to reverse?
as discussed earlier the price action on the higher time frames was actually relatively bearish;
the previous low of the sideways range, as earmarked by the break of structure line had been broken;
up to the point of break of structure the price action had formed 2 lower highs and 2 lower lows; and
the 200 period moving average, after two failed attempts to move above it was now acting as resistance.
I didn't show it on the chart but my stop loss was placed above the 200 period moving average. For this trade I considered that the reasons above made this a decent probability trade.
The price action subsequent to entry is shown below, again on the 5 minute chart.
Thankfully the price action after breaking structure mentioned continued to the downside. Once the profit had achieved over 3R I decided to take 50% of my position off the table and letting the remainder of the position ride. I had also adjusted my stop loss to bring down and lock in some further profit should the trade reverse. I placed the stop loss the next day above the high of the gap up.
Overall I made just under 3R on this trade and my profit taking, although not perfect, it was well managed. The price action after I had gotten stopped out ripped to the upside.
This all sounds very good on the face of it with the trade moving to 3R. However, my profit taking strategy only allows me to take profits at 5R. Look at the analysis below of what would have happened if I had let the trade run, and didn't interfere with my profit taking strategy.
My overall profit is shown in my trading statement on this trade.
The lesson for me on this was that profit taking rules must be adhered to in order to maximise trading returns. This is particularly important for me as I am not a trader who seeks 2R returns and exit. I am looking for the home run trades and those are the trades that form the bulk of my profitability.
Trade Clearly!
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