On July 3, 2012, we received a 5 time frame buy on a Malaysian stocks 2291-kls, Genting Plantations Berhad. Here is the email we received.
The chart is shown below. For Education purpose, we have shown both the pull back and breakout entry for all the different styles of traders.
For breakout, The Entry was 9.56 with an initial stop of 9.17 and a preserve mode value of 9.87. At preserve mode, we will tighten our stop to protect our profits. The min. potential reward will be 0.31 and the initial risk would be 0.39. This gives a potential 79% profit ratio. We like it to be around 100% so the goal was to evaluate the trade when we enter. When we enter, the stop had moved up to a point, our potential profit was 100%+ so we stayed in the trade.
For the pull back traders, the entry was 9.26 with an initial stop of 9.17 and a preserve mode value of 9.87. This would give us a reward of 0.61 and a risk of 0.09. This is a reward/risk ratio of over 6:1 i.e 600%+.
The trades have entered and we are already in PRESERVE mode now. This means we have tightened our stop to protect our profits. The current stop value is 9.87. With this stop value, this trade is FREE. We have no more risk. As the trend moves up, we lock in more profits. If we get stopped out, we gain a profit not a loss. This is how you trade the institution way. Good reward/risk ratio with technical analysis.
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