First Step Risk Management Experiment: Return to Basics


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For past 1 1/2 weeks, Crude has been in a range. So I have been fading the range at the extremes. Succeeded mainly without stop loss. Risky move, but trusting in PA which says you can fade a range. Whenever I put stop loss, it has been taken out. Sometimes I exited a winning trade before it quite reached the other side of the range, contented with a smaller profit.:happy:
Some days, there were no trades. Today seems to be a no trade day, for crude has taken a bullish cross on the 20-50 EMA, but the high on 1hr USOIL is lower than the previous high.:confused: And even if it breaks out, PA tells to wait for a retest of the high. Or wait for a higher low to form. So better wait and :watching:.
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Your stop is where the underlying premise of the trade changes/fails. Your risk is the maximum capital you are willing to lose if your trade hits your stop. Your reward is the money you make over the break-even point.

Please understand the above statements well.
As per this statement, the above trade (post #3 above) in a ranging market would be valid till it starts trending again. In that case, the stop for this trade would be huge, as linkon has remarked in his thread Let's have fun with Crude.
Which reduces the position size drastically for range trades.

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