Although never a guarantee, TA often gives clues to market behavior.
I will give you an example of market action that was quite typical that would
have provided a sell signal for shorter-term traders or anyone looking for a
reason to get out on earlier signals (which may or may not turn out to be
accurate):
One of the classic methods for protecting gains on profitable positions is to place
a stop-loss somewhat underneath a swing low once it has been established. If you had done so
here you would still be "in the trade"
BUT, bear in mind this is an hourly chart... The thing about timeframes is that they are fractal.
Mini trends on a smaller time frame are just a small part of a larger picture on a larger time-frame
so that much of this trend would be invisible (and irrelevant) if you are swing/position trading.
If you are trading a daily chart and looking at the 5 minutes chart for exit signals you will cut a
a tremendous amount of trades before you should... (Some times one can use much smaller time
frames to hone in a more exact entry, but it is most often not worth the time or effort IMO)
The daily chart had its own warning signal (based on volume analysis):
If you are a longer-term investor or trader you would not have much purpose in looking
at anything less than daily charts (even that can be detrimental to long-term holders).
It is a much more linear move from this perspective and there is no
normal Swing Low,
Swing Hight development (yet). One could Identify some levels for stop placement but
they are not nearly as well defined as in the hourly example.
If you are a Long Term investor who wants to integrate some TA for profit-taking I believe
you need to give this room and focus on higher time-frames... You could look at previous
highs on a weekly chart for example for a guide and place a stop below one.
Some options, in this case, on that basis are under the levels of 0.625, 0.44 & 0.35.
0.625 is too close for comfort IMO if you are looking to ride out the BRN journey and not get
stopped out (or stop-hunted) prematurely. If one wants to hang in for bigger rewards one has
to be willing to risk a little more on paper gains... or be quick to re-enter when necessary.
I personally have taken good profit on BRN already and the remainder of my holdings currently
has a stop below 0.35. Might be overkill, but I what I have left room (more than I usually
give my trades). Some room for a shakeout, some room for impatience, some room for
profit-taking etc... Will consider moving it up as I watch how things progress...
I will trade other parcels if it gives me the right opportunity with tighter stops.
When price action normalizes a little more (which it will at some stage) it will
get somewhat easier to manage. These moves are always the hardest to time from a purely
technical point of view... Price movements also equate to much higher percentages and it
is impossible to consistently pick the top.
I will trade other parcels if it gives me the right opportunity with tighter stops.
One can also always break up stop-losses so lock in gains on parts of one's holdings and
give the rest more room... It is a matter of discretion and depends a lot on one's entry, rules for
trading/investing, confidence in the fundamentals, and one's appetite for risk (including
risking paper gains). I personally manage positions I intend to hold long term based on weekly
charts (while taking the daily into consideration) as long as I do not see the fundamentals falling
apart or some other warning sign...
Focusing on a time-frame that does not correspond with one's intentions is a classic mistake many
amateurs make. I posted the hourly chart above for the purpose of illustration. I let myself peek at
them occasionally to see what day traders are seeing but I always give precedence to the higher
ones. For a long time, I did not allow myself to look at them at all.
I do occasionally take a day trade these day (used to be a day-trader) but very very rarely...
There are many other TA tools and systems that could address your question such as
Fib extensions, moving averages, oscillators and other indicators. I sometimes use some, but I prefer
to look at price action itself, as all indicators are derivatives of price. The above is just an example
of some of the things I look at (aside from classic chart patterns of which there currently are non of
relevance). Most of these things are best decided ahead of time.
That is the short version of it lol...so apologies for the length...
All IMHO.... Hope that helps a little...
(20min delay)
