Akamai Technologies, 30-minute Chart
Questions:
1) Why would you be paying attention to this stock on Thursday, October 30?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Thursday, October 30?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?
Answers:
1) Because it was unusually active, and very volatile.
2) Up. You’d be looking long.
3) Long at 7.76 on a buy stop above the 11:00 inside bar.
4) Initial Protective Stop: 7.58. (max. 2.32%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could sell half, carry half, or just close it all at once.
AKAM was extremely active doing about 38,000 trades on the day, so you couldn’t miss it. The stock closed at $8.03 giving a gain of about 3.5% from entry. The initial risk of 2.32% would give a fairly unsatisfactory reward to risk ratio of 1.5 : 1, but AKAM was flying so fast it would have been prudent to move the initial stop up to $7.69 very quickly, which would have resulted in a much sweeter ratio (4:1).
Remember that once you know what to watch for, the real trick is learning good money management, and most people get bogged down looking for some “system” when they should really be thinking about how to manage risk.
Screen capture of my intraday Watch List:
No comments:
Post a Comment