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Monday, February 13, 2006

Viewer Mail - 021306

Ed sent the following email:

"X, I took a trade in CI today on a break of the 10th bar. It was weak, and I caught a nice move to the fibonacci extension. I wanted to see if this was a trade you would take (I am trying to trade like you and take what you would take), or if I was just lucky?"

First, I don't expect or even want anyone to try and copy (exactly) what I do - take what I publish on the blog and make it your own. That is what I have done over the years - I took things from Nison's Candlestick studies, Tradethemove's Fibonacci studies, and numerous other sources and developed my own methodology. I encourage everyone else to do the same - once you make it your own, you will be more successful!

Now, regarding the specific entry in CI - there was a gap down and weak first three bars. Price then pulled back from the morning lows; that rally looked like it was stalling out on the ninth and tenth bars. As you pointed out, the tenth bar was weak leaving a long upper tail. Personally, I would have not taken the trade as I would have wanted to see a more narrow range bar with no lower tail/wick (there was a small lower tail on the tenth bar), and I would have wanted price to stall out below the opening range low - not above it.

Having said that, however, I think you made a solid entry and a solid trade. As long as you were prepared to exit if price found support and did not fall, you had a low-risk trade. And, as we can all see your target was hit about six bars later.

So - would I have taken the trade? Probably not. But, was it a good trade on your part? Yes. Congratulations.

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