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Avoiding losing trades Part 3 - Trading Long
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The BBS selling signal came with a low price at the level of the 50 day average. The support at this level pushed price up again, now creating a new BBS buying point.
Shall we open a new long position?
Price is very close to the resistance of the previous top (red horizontal line) and close to the long term resistance at the $10 psychological price level. It is also far away from the 100 and 165 moving average. We cannot expect a medium or longer term up move, because the stochastic oscillator is not starting a possible up move from a low level.
With all this in mind I would wait only opening a new long position if price breaks above the $10 barrier. Eventually waiting for an entry signal from S10_RSI_Xtreme.
As you can see in the next figure price did not manage to break the resistance and turned down after some days.
Trading Short
April 17 2002 price is falling below the 165 day average AND moving below the low side of the BBS channel.
After a medium to longer term up move there was a long selling signal April 3 when price fell back to the 50 day average. Price moved further down now breaking the 165 day average AND with price below the low side of the BBS channel creating an entry point for a short position.
In general it has not much sense to look for confirmation here. Mostly price started already a down move and you will find rather buying and not selling signals. However it is advisable here to keep a stop loss. Here I would keep this stop at the level of the last top and the 50 day average, that is around $10.6.
After some consolidation price continued the down move.
With price still below the upper side of the BBS channel, we now see price bouncing up from a previous support while the stochastic oscillator and the S10_RSI_Xtreme indicator diverge making higher bottoms compared to lower bottoms in price for some time already.
So, if there was a good moment to take the nice profit, it would be now!
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Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.
Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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