It is not often that I do counter-trend trading nor do I recommend this to traders who are just starting out, this is not part of my niche. However, I use my understanding of SUPPORT & RESISTANCE techniques to buy the bounce and sell the fade.
If you notice in the chart above, after a stock has made a strong move over an extended period of time in one direction (in X’s case – downtrend) , a rebound is likely to take place. The stronger and longer the move in the direction of the trend is, the STRONGER the REBOUND is likely to be.
I aim to look for trades that have 1:3 Risk-Reward-Ratios. My objective is to profit from the rally and not ride the entire move. The latter causes a lot of traders to “REGRET” their decision in execution, I just have a different perspective, as long as I can see my conditions in a set-up being met, I’m good. I don’t care about maximizing gains from point A to point B, I’m about staying objective and not day dreaming of potential big gains from doing ONE TRADE. That has been one of my belief systems in momentum trading that kept me sane and profitable since I went full-time.
Reflection: During market downturns, look for stocks that are emotional and that which panic is present. Usually these are the stocks that can give you opportunities.
I had MRC and sold it at +3% as it slid back down yesterday during trading hours.
Last night, I read about Expanding Awareness specifically about these 2 interesting types: “Relaxed Awareness & Focused Awareness”. I related the setting from business/military to trading, encoded this finding in my book journal, then I took action today since the opportunity presented itself.
My entry was:
“Trader Awareness: Imagine a trader looking for a potential trade set-up, they use RELAXED AWARENESS to absorb information, imprinting it at a deep subconscious level. Suddenly, you see an actual stock in play and you switch to FOCUSED AWARENESS so you look for clues and trigger levels then stack your probability to see ‘if the juice is worth the squeeze’, meaning, if RRR, niche, readiness at the moment checks out. You are now in a heightened, alert state, ready to explode into pure execution mode.”
I recommend this book, it offers a fresh perspective about mental toughness and how you can integrate it in your daily life whichever domain you are in.
Thank you Mesino for lending me this. Half-way done. 🙂