sleep soundly without any stress. I obviously don’t want to win big one
day and get a heart attack the next day. Trading should be relaxed
and it has to be consistent. It should not affect our life physically or
emotionally.
Case Study #2 Foundation Coal Holdings Inc
FCL was spotted a bearish reversal candlestick formation on 29 Feb
before market opens which fulfilled all the bearish reversal conditions
coupled with a strong negative divergence present in the stock chart.
FCL was trading at $57.77 and the low was at $56.83 and the trading
plan for FCL entry was set up using a conditional order.
If stock price < $56.60, buy Apr 08 $60.00 Puts
However the order was only triggered 4 days later @ $6.50 when the
stock falls below the entry point. Having paid $3.10 for the time value
leaving behind $3.40 in intrinsic value, I must bear in mind that if the
stock moves sideways, time decay is going to be harmful to this trade.
A stop loss was then set at $4.50 giving enough room for the daily
noises and a maximum of two weeks holding period.
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