Friday, September 08, 2006

Don't be stubborn

Have a trading plan, call tops or bottoms, trade countertrend, but ... Don't be stubborn

I've written about me liking gas futures around 6$. Gas fell hard yesterday and I thought my reasoning still sound. So I went long QG yesterday night, and closed it after the open for a few ticks, as it did not take out the 5.730 resistance level.

Globetrader_30

My trading plan called for a retracement of yesterdays sharp move lower on the assumption, that gas, being down below 2004 pricelevels, would find a bottom around here, with the montly support coming into play as well.

Globetrader_31

In a downtrend you have just one bottom, but a lot of false ones. And going long a sharp downtrend as we have seen in gas over the last month means you take a countertrend trade. So you have to be prepared and bail, if the market is not behaving according to your plan.

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