Special situations or hit n run trades

I recently had an example of what I call a hit n run trade. Sometimes there are charts that come up in scans and you see a special situation in play. For me, a special situation is any kind of market action that will provide me with a market bias but does not fall into the stricter rules of my trading plan.

The following daily chart of AVP is a really good example of this and shows a horrible range of consolidation with a dramatic gap breakout to the downside followed by an immediate and strong rally.

I noticed the chart in a scan pre-open on the 10th Feb and my approach was straightforward:

1. I dropped to an intraday chart and worked out support levels using retracement analysis
2. I placed my buy order at my chosen level and attached a stop-loss order at another chosen level
3. I estimated where I though I wanted to take profits and placed that order to exit ahead of time as well
4. I went off and traded something else and then spent the afternoon working in another office

My entry order filled during the day on the 10th. My exit filled on the 11th in the morning and the trade was done.

The point of this post isn’t to show off a profitable trade but it is useful to see how the well-prepared and organised trader can take advantage of quick situations as and when they occur without investing too much time or mental energy in the process. This kind of trade will usually just pop up as a by-product of looking for other trade opportunities. If you are not organised and know your techniques and markets you simply will not be ready for them.

Anyone who has had a seminar with me or chatted in the forum will know how draconian I can be about drumming organisation into people!!!

Good trading!