Prior analysis for TLT is available in here. Now that TLT made a +1R (where R = initial risk) move, I see three potential trade management approaches to this trade.
Trade Management Approach-1:
Move the position stop to break even. Sell half @ 1R profit (which should have been triggered today) If not then hopefully it will go there again tomorrow. Key is moving position to break even so that position becomes a free rider.
Trade Management Approach-2:
Move position to break even. Don't sell any yet. Let entire trade run. In short, take out the risk and make full position a free rider.
Move position to break even. Don't sell any yet. Let entire trade run. In short, take out the risk and make full position a free rider.
Trade Management Approach-3:
Don't do any thing yet. Give wiggle room for the market to work.
Don't do any thing yet. Give wiggle room for the market to work.
Now which trade management approach do I take?
If I know what market will do next then that would be fairly easy. Since I don't know, I am going to chose suitable trade management approach via a process of elimination
- What I know right NOW is - market is in a range, there are two resistances in front of it and today's up move is weak. It already failed to go up once (prior swing) and if it fails again then I am not comfortable keeping the risk i.e., waiting around and hoping third time is the charm. Also this is not early stages of a trend. So approach-3 is out.
- Right now I know market is still in uptrend longer term and I would like to participate in the trend for higher R return. Both approach-1 and 2 would satisfy this requirement. But there are two resistances in front and market is near Dec 2008 peak. So the move to new highs may still happen but not good enough reason to stay without any pay for from the trade for the work and risk I have taken. So approach-2 is out.
- So my choice is approach-1 i.e., sell half @ +1R and move stop on other to break even and trail via a stop.
How would you analyze TLT and if you had taken trade how would you manage this trade? Feel free to point out any errors you see in above analysis.
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