The LL trade has already gained about 10% since the short entry just two days ago and still offers a very objective short entry or add-on to the position around current levels, as prices are trading just below the recently broken wedge (original short entry was at the top of the wedge). This is my of favorite longer-term swing trades based on it’s chart pattern alone but I made some additional notes to this lumber futures chart (see previous post if interested in this trade) which should help put some wind in the sails of the LL short. As my preferred target of 35.10 would be about a 46% gain from entry if hit, I am giving my trade quite a bit of room on my stops, at least 10% or so from entry.
For those targeting T1 or maybe planning to take partial profits there and full profits at T2, make sure to calculate an appropriate stop based on your profit potential and you average position cost. As a rule, it’s best to use a R/R (risk vs. reward) ratio of at least 3:1 when taking a trade. This means that you shouldn’t risk more than $1 of losses to make $3 of expected gains. Again, that is a general rule and one that I try to incorporate into my trading but each trader or investor must use stops that fit their own risk tolerance and trading style.