Trade Management

Finding that trade with the right risk:reward ratio and high probabilities is just the first part of a successful trade. The second part is "Position Management".

I'm using RINO as an example for a few reasons, one is the spectacular fall it has seen recently and today (down 57% and 25% respectively). The other reason is because RINO is an excellent example of what I tell you all the time, "To make money in the markets, you must see what others have missed".

Lets look at the charts...

 Okay, lets assume that you entered the Rino trade on the breakout from the bullish descending wedge. The first thing you should know is your rough target before you even enter the trade so you can use risk management and proper position sizing and understand your risk to reward ratio and decide if the trade is worth it. Assuming you entered, one of the first targets you must consider is the base of the descending wedge as wedges usually retrace their base. That means your first profit target would be around $16.50 where the smaller red arrow is. Your second target would be the next major resistance point which is at the longer red arrow around $19. At either of these targets, you want to be watching the trade carefully that it is confirming the uptrend and not deteriorating. If you look at volume very carefully (remember-it's not the huge spikes, but the subtle changes) you will see rising volume on the uptrend then it goes into falling green volume-this is a bad sign. Finally we see rising red volume. At this point volume is not confirming the trend, it's actually warning there's a problem.

 I often say that the 22 day moving average is a good approximation for my Trend Channel which is the objective stop system I use. When Rino broke below that 22 day moving average, I would be making exit plans, especially seeing a negative divergence in RSI (below in white-it fails to make a higher high and confirm the trend). Finally RSI crosses below the 50 (middle line) which is an exit.

Finally, if you have 3C (if not you can always email me) or some other money flow indicator, you may have seen the negative divergence at the top, that would be a cue to start exiting the trade.

Rino is an excellent example, once again, because of the subtlety of the signals, but they are there. Remember, "see what others have missed".