I had a question about my trade this morning. Over night we sold off big time from the china news. I have a definite short bias and want to get short. But getting in after such a big sell off can be tough.
It is 9:15 here. The way I look at this is I see the 36-44 area as resistance and if it moves above that I would be out. I want to be short here as I'm thinking this could potentially sell off even further when the market opens as its had no real rally over night. The problem I run into is if I take a short here at 23, that is way too much pain to take if it runs back to the area I'm looking for it to hold and prove my short wrong. But if I don't I could potentially miss a big run down and never have another chance at getting back in.
So I'm just curious what most people do or think of situations like this. Thanks
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Without looking at your analysis at all... The obvious suggestion is to scale in. If it takes off in your direction then you have a head start getting the position you want. If it backs up then you get to build your position at a discount.
Naturally this doesn't work if you are trading only one contract..
Scaling in, however, opens a can of worms. I've not read anything on the topic here but often people run into trouble with it and warn people to steer clear. Research a bit and you'll find differing views.
The problem I find with it is that it causes you to over invest in the position. Not necessarily monetarily, but psychologically.
Really, it is the old story: have a plan. Scaling requires a fair bit of working through to validate but it is possible to do. Just make sure that you have your eyes open and consider the full range of scenarios.
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What you think based on what you feel is usually wrong.
You're 60 points too late by that point, and good thing you didn't actually take it (right?) since the market bounced hard. You would've being one of those FOMO retail guys who got in last and sold to the insto's buying the dip.
Also 1900 is a fat round number, you can expect it to hold extremely well (which it did).
If your stop is too much pain then there is only really 1 obvious answer, you can't take the trade.
Opportunities come often and go often, but your bank roll only comes once, don't be greedy.