I think one of the key elements is the trade angle in this case. This is the way to get the most bang for your buck when it comes to buying and selling, but it’s also the way to get the most bang for your buck at the lower ranges.
At this point our $4,000 and $5,000 trade angles are at the upper end of the average trading range. At these levels the value of our trade is not very favorable. When we sell at this time we see an increase in price, which leads us to believe the other trader may be out to make a huge profit at the other end as well.
For this particular stock the trade angle has reversed to the downside in this case, and although we did come out ahead, our trade is way too small for a price increase. We need to stop at a price lower than the original swing highs to continue our trade.
I have already mentioned this before but sometimes you just get unlucky and you don’t get your trade in with the correct trade angle. It’s a common thing, and there’s no quick fix for it.
If you get a large order for such a cheap stock, you may think you have a 100% buy at $4,000, but in actuality you got sold at $4,450 on your $25,000 swing and you haven’t earned a penny back.
At this point I’d start looking at what your swing could have done at the original swing range. If at the close your swing ended up at $3,500, what would your trade look like if you got to $2,000?
If you ended the trade at $3,600, it would have been in line with the trade angle at the time at $4,000 for a $5.00 price increase. That would be a lot better, right?
If the close ended in $1,800, it would have been the ideal trade to close at $2,200, but after a 10% gain you’d probably be getting a lot less than that from it.
If you ended the trade at $3,700 after a 10% gain, you were better off with the trade angle at $4,000, but if the closing closed at $2,700, you’d be better off getting a big gain at $2,800.
Now at $3,700 our swing was very unfavorable, and after losing the last 40% we
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