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TFC Commodity Trading Forum

Re: Trade entry, Minimal risk??/Lee

I know what you mean about getting on board 1st on both sides of a trade and then cutting the losing one loose on a move. With prices typically zig zagging I would think one would need to only choose a price pattern such as a Flag or tight consolidation pattern of some sort or triangle pattern that is explosive by nature so you don't end up with being whip sawed on normal zig zag price action or worse being sideways trading. Markets statistically only trend less than 30% of the time they say. So you do need to see an explosive type pattern. So "IF" one was using a pattern like that to increase the odds of a sharp strong move out of a tight pattern then it should work fine. But price would need to be a breakout of some sort to have legs and move enough to justify a loss on the one side with commissions and run a decent distance one way without a lot of sideways action that would fake you out and likely stop you out. This is what Option Strangles are good for. Being a Strangle is out of the money Puts AND Calls that are cheap being out of the money it will capture a breakout using your theory of covering both possible sides of a trade. I've mentioned these before and given examples. But I guess it would also work with an actual long and short as well without any time loss like on Options. I know some people do trade like that but I'd always be concerned about a very sharp move that I didn't get out of one side fast enough. With today's volatility it is easy to end up getting trashed in a heartbeat. One would have to watch it like a hawk or the sharp move on one direction would only be offset by the loss on the side not exited.