With the markets in a big consolidation pattern and with the low volume in the equity market, you have to be extremely patient. June, July, and August is where most retail traders and even some professional traders lose money in the equity market. The summer months typically exhibit a big volatile consolidation pattern. Doesn’t mean it will do the same this year. This is why we are still trading but we are very “picky” on what opportunities we take during this period. The lowest risk trades are pull back trades. Therefore, we have been looking at multi-timeframe pull back trades which have a high reward/risk ratio.
Below is a 2h chart of the US Stock Dominion Resources Inc, D. The stock is at a all time high and still has some potential to keep trending higher. The trade triggered this week as a pull back trade.
The trade was initially setup on 5/29/12 when we received a 5 timeframe Email Alert.
Here is the current chart with all the information. The entry was $52.43 with a stop of 52.28 and a PRESERVE mode value of 53.59. The worst case potential reward will be to the PRESERVE mode value which will be 1.16. The initial risk will be 0.15. This would give us a reward/risk of 1.16/0.15=773% profit potential. This is worst case profit potential because when price gets to the PRESERVE mode, we are NOT going to exit the trade. Instead, we are going to tighten our stop to protect our profits.
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EDUCATIONAL USE. Commodity Futures Trading Comission, Forex, Futures, Equity and options trading has large potential rewards, but also large potential risk and may not be suitable for everyone. You must be aware of the risks and be willing to accept them in order to invest in these markets. Do not trade with money you can not afford to lose. This is neither a solicitation nor an offer to Buy/Sell. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this document. The past performance of any trading system or methodology is not necessarily indicative of future results. All information provide d on the Blog is for educational purpose.