AXFJ: In Search of a Low.

Anatomy of a Trade: Let's review what was Evident; Actionable & How would one 'manage' the previously noted Aggressive Short Trade yet with defined Stop/Loss.

1. Signal: 240 Minute Reversal = Actionable Signal (RED Arrow 04/ 08) >>> A Large Price Range Reversal (RED) Candle @ 10,150.
2. The interim Support circa a 38.2 % Retrace (viewed constructively) & forming a Third Point of Support with the immediate 'Bounce' off of it.
3. Breach of said Support Line (see previous Post/ Email 'corrected chart.') THIS inferred that the Sell- Off was 'Serious Business' & with NO Price Signal (240m) to signal an Exit from the Short.....then 'Let the Position Run.'
4. US Banking Index Losses reinforced the Losses as the Aussie Banks are NEVER too far away from the US Philly FED Banking Index developments.
5. Domestic Economic news (Australian Mortgage Demand) was THE Catalyst BUT the Reversal (240m) Signal presaged it without 'knowing' this......?
6. Initial Positioning: The Reversal WAS The Signal for a Tactical Short Trade.
7. Plan the Trade | Trade the Plan = Sell 33% of your Risk Position (X) @ the Close Price of the 240 Minute Reversal Candle (10,073) with 'The Plan' to Sell (if the chance occurs) another 67% of Total Risk Position @/ below High Price (10,150)...aka: 10,125 (?) & 10,140 (?) Average Short Price = 10,113.
8. STOP/ Loss: THIS is a Function of Trade Risk Profile.....SO; it's a Tactical Trade & as such; LIMIT Losses: 0.75% (?) whilst expecting to capture > 4.25% GIVEN that The Plan was a Retrace back to the 38.2% @ 9,665 (425/75 = 5+*)
9. Planned EXIT Level was 9,665. Why didn't one EXIT? A: There was NO Clear & Evident Price Signal; simply a 'bounce' (which one old timer from up Byron Bay way always opined....Respecting a Technical Level 1st Time signals that there's MORE to Run in the ABSENCE of a Price Reversal Confirmation)
10. Now what? We AWAIT (patience) a Signal that identifies a Potential Bottom & Termination of the Decline. OR we exercise Proprietary P/L considerations.
11. How so? Trending Lower ADX > 20 & Rising + DMIs are in Sell Mode (RED > Green) instructs us to 'Sit Tight.' Need to Witness an Identifiable Low.
12. Stop- Loss Management? Tactical Trades CAN follow a Japanese Rule. "Should you get on the Wrong Train, get OFF @ the Nearest Station; the Longer it takes you to get OFF, the MORE expensive the Return Trip will BE."
13. Translation: Find an Edge to lean UP against on the Stop- Loss. EG: Reversal High Trade + Your Risk Tolerance [=f (P/L Expectation) = f (What's the Field Position of the Overall Market (Over- Bought, Diverging Momentum Studies)]

SO here's todays Chart: Apologies as it's a Busy Chart.....Lots to garner from & better understand that Risk Management IS The Game once a Signal witnessed.

Additional Note: Initial Assumption of 'X' Sized Risk Position could have been added to dependent upon unfolding Price Action & Initial Positioning Advantage.

AKA: If you're in a Strong Position AND identifiable Risk Management (S/Loss) Levels present themselves (THAT Rising Trend Line of Support [3 Points] becoming overhead Resistance an uncommon BUT Highly useful Trading Advantage to exercise a Higher Degree of Aggressive Exposure) but with DEFINED Risk Profile (Tight & Identifiable Trailing Stop/ Loss @ above the Trend Line of (now) Resistance.) SO one could have added more Size with a Tight Stop/ Loss.

[Plan the Trade | Trade the Plan]