Sunday, July 19, 2009

TKTM - Update #1

Let's look at this first trade and see how I am managing the risk so far and what needs to happen next. After TKTM was selected it gapped up along with most of the market on the next day. Due to the gap up on the open and the subsequent sell-off, I would have gotten off to a bad start - probably receiving an entry somewhere around $6.70 (or $0.35 higher than expected).




That said the stock did not sell off much before marching higher. Due to no major retracements I would still have this position today with the original stop at $5.35. At this point the stop needs to be moved up to $6.70 (estimated entry price) for a break even trade at worst.


So far the trade is going in my favor. I need to stick to the original risk management principles (use stop loss to manage risk). I also need to stick to my time stop to make sure that I am making an effective use of the risk capital.

I will exit this position on the soonest of the target price getting hit, my stop getting hit ($6.70), or my time stop getting hit - 10 trading sessions.

So far the stock had an initial risk of $1.35 ($6.70 - $5.35). With stock currently at $7.38 or $0.68 above entry price - I have a temporary gain of 0.5R ( or 1/2 X my $1.35 risk). If the target of $10+ is hit - I may realise a 2R or 3R return.

These numbers are not great - I need to strive harder to find favorable risk reward setup.


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