July 3, 2009
UNG Enters Target Zone
I know I promised not to talk about UNG again, but it finally entered the original swing trading target zone so I thought it would be useful to talk about trade management, i.e. balancing fear and greed.
Recall the original idea was to get short on the 19th with a swing trading target of 13.26 - 12.85. Really skillful day traders could have gotten short as high as 15.45. Every one of the free trading ideas I post on Twitter is conceptually sound (i.e. good in theory), but the tricky bit is managing the trade once it’s open.
When I day traded, I almost always went flat at the end of the day so I didn’t have to worry about managing my mental state over several days. With these swing trades, the best thing I can come up with is to exit part of the position on a reversal of the intraday volatility stop and carry the rest with a stop while waiting for the swing trading target zone. This way you satisfy both your greed and your fear, keeping your mental balance.
Following this thinking, with UNG you would have exited part of the trade at 14.65 on the intraday volatility reversal. Then the question becomes how to handle the balance of the position. The greediest way would be go breakeven and wait for the swing trading target to be reached. This would require a lot of patience, but would be the most rewarding. The scaredy-cat way to handle it would be to continue to trail some kind of stop on the balance, and as you can see from the hourly chart below, probably a ton of skittish shorts covered on the 25th and 26th.
When your initial stop is only 15 cents, every 1.50 you leave on the table is another 10-bagger. That’s why it’s probably best to stay at breakeven on the balance of your position and hang in there patiently. Thoughts from the gallery?
July 3rd, 2009 at 8:58 pm
Chairman,
I would have been stopped out too. I typically trail my stop using the penultimate bar (two days back). In this case, the high of the next to the most recent bar on the daily chart. I’m not sure this really works any better than any other method though.
July 4th, 2009 at 1:27 am
Hi Chairman . . .
Will you please step into your time machine and see how UNG looks long?
July 4th, 2009 at 1:35 am
why even bother to short this for a buck or two? this is a fundamentals play not for a swing.. waste of time and holding up good money that you can make same gains in a few days on something else.. just showing off shorting this… poor pick 2 short..
July 4th, 2009 at 6:23 am
I don’t think a 16% return is a waste of time.
July 4th, 2009 at 7:08 am
@Victor: I’ve heard of the “two day” high/low trailing technique and it reminds me of my “Arbitrary But Consistent” stop mgmt. I don’t think there’s a “best” way to manage a trade (no such thing as a “smart” stop). You just have to try to balance your greed and your fear to maintain your mental health.
@Donato: Now that it has entered the target zone, maybe it will catch some “support,” but the trend is down (weekly, daily, hourly, etc.) so it doesn’t look good to dude, dude.
@stocker: Think about reward in terms of initial risk, shorting for “a buck or two” can mean a 500, 1000, 1500% return in a very short time. I think you need to review your logic/thinking which may be clouded by the fact that you “like” or were long UNG.
@KC: I agree, especially when initial risk was as low as a dime. :-)