RE: CHARTS -T LINE TIPS16 May 2016 09:10
Good morning OilBcNu from the 88e chat board re your query below
On your charts you say that sell when price is too far ahead of your T line (8 EMA). Do you use a relationship between the two to make your call to sell.
Short answer no. This is because on each spike where price races too far ahead of the T line the circumstances will be different. One should also remember that it is the candlestick reversal pattern that should be considered first,then other factors such as is stochastics in the overbought area, is price near or at a resistance level, even though price has closed in a bullish candle does it have a long/longish upper wick suggesting selling/profit taking has set in, what is the percentage gain, are you happy with the paper gain, what price target had you set in your trading plan.What caused the spike.Finally has price closed below the 3ema?
So there are many factors to take into account.
Best way is illustration see chart below. unfortunately my platform is playing up so this particular historical chart does not include stochatics.
http://content.screencast.com/users/LEFKOSIA/folders/88E/media/77011307-12d4-4195-9d6b-9745173a266c/88%20e%2016.03.16%20chart.png
say you bought £5k on 10 feb at close of business at .80p. Price had doubled from 0.40p. Stop profit set as 3 bagger =2.4p 6 bagger from flatlining price of 0.40p.
On Monday price gapped up on opening at 2.1 and rose up to 2.9. Your stop profit got hit and you have crystalized a £10k gain in 3 trading days.
Say you believed the amateur funda analysts and rampers GUESSING at price at say 5p so you set your stop profit at 7p(You never know!)but in your gut feeling you would be happy with say a 4 bagger =3.2p.
At close of play even though price got close to your 3.2 it only reached 2.9 so you didn't pull the trigger but are aware that at 2.9 price is way above the T line, and profit taking had set in BEFORE the close. Tuesday price gaps down on opening at below 2.4and continues never getting above opening price. Decision time. Don't let paper profit slip away. After all this is AIM and price could retreat back to the Tline and beyond. Pull trigger at say 2.20 and wait for price to settle.Price closed at 1.2 with short lower wick so only limited buyers bring price up from the lowest price for the day. Phew glad I pulled the trigger. Lets wait before going back in as the trend has been broken even though price has closed above the Tline. Next 2/3 days indecision candles.Neither bulls or bears winning but price still above T line. Next day price gaps up on opening after the previous bullish indecision candle so cautiously go back in with half your profit say 5k . Don't want to give it all back as risk is price could retreat back to 0.4p.
Great price is in a trend bought back in at say 1.45. As price reversed at 2.9 set stop profit at say 2.6 p to almost double your 5k. Sure enough price hit 2.79 and took you out.However price still closing above T line so safe to stay long. At this stage being a cautious investor I may have quit. 2 bites at the cherry and between 12 and 14k in the bank. May have gone back in at 2.6 and let it ride with £2.5k to 4p. The 4p is a 10 bagger for 0.4p lth and sth. Bound to be some profit taking in that area. Common sense psychological price.
It may not have gone that way as those moves are based on a daily chart only and MY trading style and attitude to risk, but it beats the old concept of buy and hold.
For a 0.4p LTH there was the opportunity of cashing in at 4p when price started to be choppy thus crystalising a 45k gain on a £5k investment and if still convinced this is going to 10p and more to buy back in at today's price or lower when the current bear trend reverses. Fear and greed imo prevented them from doing so but that's my opinion. Some chap said he was 'cool' to have let £100k slip through his hands. Can you believe that?
GLITA mARKET HAS JUST OPENED.
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