I hadn't had much time to trade recently but I did open a 100 shares short trade on Alibaba on the 24 June. My winning trades for this day are detailed below. In order to show context, the chart below shows the price action of Alibaba on the 5 minute chart zoomed out to include previous days. Context is everything and zooming out is critical before taking any trades.
In previous days, the price action had gapped down, close to where there had been clear resistance. To the right of the chart you can see where price reached that previous resistance, after an explosive move up within an hour of opening. This can be better shown below in the zoomed in price action.
The circled candle was a Gravestone Doji. This was my signal for getting ready to enter a trade if price action showed respect for the downward price pressure and was to continue. I entered on the close of the next candle with a stop loss above the high of the signal candle. The following candle for me was the confirmation for entry. The Gravestone Doji candle has a much higher probability of being a signal of a reversal to the downside after it has been after an explosive move to the upside.
I left my trade open overnight and when the price started to go sideways after a further leg down today, into the previous area where price broke out, I closed two thirds of my position, being 66 shares, giving me a net 2R on my trade. The confirmation of my profit is detailed below for transparency.
The reason I left a third of my position open is on account of the fact that the Alibaba is in an overall downtrend. I would rather leave a third of my trade open for any possible continuation because the pain of it dropping further after exiting would be greater to me than the pain of being stopped out if it rises to the break even stop loss on the remaining third.
I continued to hold the remaining 34 shares which I exited on the 28 June for a profit of 86 as detailed in the screenshot below.
My final return was 4.2R on this trade. I decided that given there was a lot of support at around US$ 71 and the fact that this equity can gap up and down like a yoyo, it was not worth the risk. No point holding the trade longer when it is so close to the next demand zone. My additional returns would be $1 a share on 34 remaining shares.
Would you have closed the whole trade when I originally closed it or would you have kept the whole trade running and not taking any profits until now?
Trade Clearly!
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