Trading Tips

Various tips and ideas for regarding trading and investing such as placing orders, using stops, etc… These tips are included within the content of the posts listed below.

Feb 052015
FOE daily Feb 5th

FOE daily Feb 5th

FOE (Ferro Corp) offers an objective add-on or new short entry as the stock is currently backtesting the recently broken 11.85-12.05 former support, now resistance zone. The sole downside price target remains 10.61 with a suggested stop over 12.15. From the current price of 11.94, that provides a very attractive R/R of 6:1.

On the flip-side, I do see some potentially bullish developments, such as positive divergence recently formed on the 60 minute time frame and the fact that FOE has now moved above the Jan 16, 2015 & Oct 15, 2014 reaction lows. My point is not to sound ambiguous on this trade, simply that most of my trades are weighted largely on two related but different factors: Probability of success and the risk/return (R/R) ratio.

From my experience, the trades with the most attractive R/R ratios (about 5:1 and above) will usually have a greater chance of being stopped out than the those with a lower R/R (5.1 -3:1, which is typically the minimum R/R that I look for on a trade). Although trades with above average R/R's typically have a higher probability of being stopped out, the above average gains, when successful, makes up for the lower probability of success.

Of course, this is a generalization as from time to time, I will come across trade candidates with very attractive R/R profiles as well as a high probability of success. Although the FOE short trade very well may play out, I would have to categorize it in the former (above average R/R, below average chance of success) vs. the latter. With that being said, I would not highlight this backtest if I did not think that a short entry or add-on was worth pointing out for those interesting in adding some short exposure to their portfolio.

click here to view the live, annotated chart of FOE

 February 5, 2015 10:31 am  Active Trades - Short, Trading Tips Tagged with:
Oct 132014

-+*Here’s a couple of questions that I received over the weekend regarding when to act on a buy/sell signal and how to recognize divergences on a chart: Q:  I have found your comments and advice to be extremely helpful. While reading your column this weekend, [continue reading…]

 October 13, 2014 9:11 am  Trading Tips
Jul 242014

-+*The CSGP (Costar Group) short trade has been stopped out today, exceeding the previously suggested stop of 153.85 shortly after the open following an earnings induced gap. As mentioned recently, each trader must decided whether on not to hold or close a position before they [continue reading…]

 July 24, 2014 10:58 am  Completed Trades - Short, Trading Tips Tagged with:
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