Archive for October 26th, 2011

Trade of the Day

I’m a momentum trader. I look for plays that are going to follow through instantly, or else I don’t bother. Most importantly, I look for plays that are going to offer me a minimum 3 times my initial risk. That’s not to say I won’t take trades that offer less, but I focus most of my attention on waiting for the plays that are going to offer me the highest reward.

Today I took one trade at the open that made my day. It was a long in FAZ which yielded me over 6 times my initial risk amount. For this particular trade I had a dollar stop and / or a break below 44.00, which ever came first and a wide open target. I was only focused on managing my risk and adding to the position as it moved in my favor. I knew I had to be real careful with the “adds” to keep my average cost low enough to compensate for the volatile nature of the way FAZ trades. IMO, I was too conservative and should have been more aggressive near the whole at 44.00 where I only picked up one lot.

Obviously, not all trades work out quite this way. That’s why it’s important to follow your strategy for picking and managing your trades consistently. Because over time, you are going to get the handful of trades that are going to run and reward you for your efforts!