Trading for Dummies, Q&A #51

Doubleclick, 30-minute Chart

Questions:

1) Why would you be paying attention to this stock on Friday, October 17?
2) Is the trend up or down? Would you be looking to get long or short this stock?
3) Where would you get long/short this stock on Friday, October 17?
4) Where would you put the initial protective stop?
5) When would you stop trading for the day?
6) Where would you exit the position?

Answers:

1) Because it was unusually active, and very volatile.
2) Down. You'd be looking short.
3) Short at 9.70 on a sell stop below the 12:00 up bar.
4) Initial Protective Stop: 9.83. (max. 1.34%)
5) Right after you enter the position or lunchtime, whichever comes first.
6) End of day. Could cover half, carry half, or just close it all at once.

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DCLK had a violent drop in the first half hour, then crawled back up into lunchtime where it provided a lovely little reversal bar at noon -- perfect to get short beneath. Risk was tiny at only 1.34% and the end of day profits came in at 45 cents per share (4.64%) giving almost a 3:1 reward to risk ratio. This was a position where you could have brought your stop down to $9.75 almost immediately, if you were feeling particularly risk averse.

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Screen capture of my intraday Watch List:

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