I indicated in the last instalment that I had made an error and would be confessing today.
Here it is. The only open trade we have currently is the symbol UDN. This is the stock market proxy for the Dollar Index declining (meaning a basket of global currencies is strengthening against the U.S. Dollar).
In the process that we adhere to like limpets, the exit from a trade is as the result of the trailing stop being hit.
There is one other way, which inexcusably, I missed.
Let’s take a look at the chart.
Just as a quick aside, the weakness displayed today almost took us out. The stop is anchored at $20.86. Maybe tomorrow – exciting!
The key focal point is a black vertical line. That line runs through the high attained by the price. It also carves through the ROC, WHICH IS NOT AT A HIGH. This is a divergence…a warning.
Traders have different processes for divergences. Some will take profits, others will tighten stops. They don’t close out the trade immediately because it is only a warning. All is well in the world could be restored by the ROC moving back in lock step with the price.
My process is to draw a trend line and get out of the trade if that trend line is closed below (in this case).
You can see where I should have exited if I had had my wits about me.
Since the stop is so close to the low of today, I will leave things as they are and let the trailing stop do its work, if it feels so inclined.
The bottom line is we should have been out at a larger profit than the one we will realize if the stop is triggered.
I’m afraid that is life in the fast lane.
Any questions, please drop them in the comments section.