In response to my NWS post, Ken asked the following question:
"Nice rationale X. I took a similar sub-par setup with ERTS. It didn't quite make it to the extension, but I closed it at a profit. Would you rate this the same as NWS, or worse/better?"
Here is Ken't ERTS chart, and my response to his question:
"Ken, ERTS was very similar to NWS. The biggest difference I see was the size of the gap - NWS was a bigger gap, and outside the previous day's range. ERTS was a little smaller and inside the previous day's range. So, I might give it a C+ whereas I gave NWS a B-.
On the bright side, you made money and price never stopped you out (I am assuming your stop was the low of the hammer bar (fifth bar)). It reached the initial target of the opening range high (ORH), so the setup in a sense still worked."
Throughout the years, I have harped on watching the opening range high/low for resistance as price is moving back in that direction after a pullback. I haven't mentioned it lately, but ERTS provides an opportunity to revisit why it is important. Ken exited with a profit because he paid attention to that level, and while everyone wants their setup to move to the Fibonacci extension (or beyond), sometimes price stalls out...especially when the setup is somewhat "inferior" to begin with (ie, a setup that receives a grade of "C" vs. an "A"!).
The ability to pay close attention after you enter a trade (ie, monitor your positions) is one reason I try to focus on taking fewer high-quality setups versus more mediocre setups; the end result is a higher win rate and the ability to make money even when a setup doesn't reach the target.
On another note, I have read a lot of comments lately about people having too many options to choose from, or too many stocks on their watchlist. This can be easily remedied - sort your watchlist by current volume and focus on the top 10 or 20 at the most. By focusing on fewer stocks, you will be less overwhelmed and (hopefully) be able to make better quality decisions.
I hope everyone is geared up for another crazy week - be safe!
Trading 27-April-2016 (+ $66)
22 hours ago