Trading Journal
“First learn to trade then the money will follow!”
ADA TRADE
Yesterday, I decided to close my ADA Short position because the price action had not moved as I expected.
I carried out the trade on the condition that the price of BTC was due to decline soon. This was expected to cause ADA to decline also.
Therefore, I prepared for ADA to start declining at my purple line (entry level) number 3.
Worse case scenario, I factored in that ADA could climb unexpectedly to the purple line number 4, before completely rolling over.
However, this did not happen. Because BTC continued to consolidate (as oppose to decline), ADA’s price movement had become more unpredictable.
This created a real possibility that ADA’s price action would eventually trigger my stop-loss, causing me to sustain a greater capital loss.
As the saying goes, “cut your losses quickly, and run your profits.” So I decided to close my trade immediately.
Learning Point
- When preparing a trade with a staggered entry, it is important to first outline a 2:1 risk to reward ratio on the daily timeframe. This is because any price action that creates a 1:1 will just result in the price returning above, or back, to the first entry level when rebounding or reversing direction. Ultimately, this would make the entire trade pointless.
- When trading an Altcoin, confirmation of BTC’s price direction is of extreme importance. Due to the volatile price action of Altcoins it may be key to ensure that all entries ensure a 2:1 ratio with 1/5 to 1/6 minimum amount of capital invested for each entry. The expectation is that these Altcoin trades may typically require a multiple number of small entries in order to potentially succeed.
Next Action
- Update trading spreadsheet with latest trade.
BTC TRADE
In light of the above (ADA Trade), I decided to re-enter my BTC trade by first outlining a 2:1 risk to reward ratio on the daily timeframe. Then outline the areas for my staggered entries.
On further reflection, making a small entry at purple line number 3 and 4, may be considered pointless. The reason is that if the price action got to this level, then it would make strategic sense to wait for the price action to return back to the trend line (scene of the crime), and see if the price starts a new trend with the trend line now acting as support, potentially going Long. If not, then my original Short will still be in play.
SOUTHERN COPPER CORP TRADE
Today, I decided to Short trade the commodity copper because the price action, and the economy, creates a strong possibility that its price will decline in the next few days or so.
Instead of trading copper directly, I decided to place a limit order to short Southern Copper Corp as the company’s price chart mimics copper’s price action, and there is no minimum amount or fees required for its shares to be traded.
USO / USOIL TRADE
I decided to enter a limit order to go long USO.
This is because technical analysis of USOIL’s daily timeframe seems to indicate that there is a strong likelihood that its price will rebound off a fast approaching support level (after is quick decline).
As USO is an ETF for USOIL, USO’s price action mimics that of USOIL although with less smoothness and more price gaps.
IVG (Involgize)