Learning Curve: Buying Near Resistances

Okay, apparently we are starting a new series called learning curve that features all of my mistakes for you to make fun of me.

No, seriously…

While I take great joy in telling you about my experiences, I want to be as transparent as possible when identifying that strategies that I use to trade, and how effective they are.

With the trade that I am about to discuss with you today, it is important to understand how ETFs work in comparison with their futures.

For the ETFs that I trade, they have two correlating ETFs based on the future that they follow. For me, this would be /NG and the ETFs that follow it are UGAZ and DGAZ.

UGAZ goes up with /NG. So as /NG goes up, the price of UGAZ rises.

DGAZ goes down as forward /NG goes up. So as the price of /NG falls, DGAZ rises.

Did I lose you?

Well we can talk about that more in the future.

What is important to understand is that as the price falls in the first picture, it is actually in my favor, and as the price rises in the second picture it is also in my favor.

Both pictures as different ways of viewing the same trade.

The first screenshot is /NG, and the second screenshot is DGAZ.

Below is the trade that I took yesterday:

/NG Chart

The red arrow shows where I bought, and the blue-ish arrow shows where I eventually sold for a small profit of about $5.

Remember that in the first picture, it it goes DOWN then it is my favor.

I traded this day with about $2,000.

DGAZ chart

The second picture above shows the chart in a more understandable way.

So let’s break down what happened.

While watching /NG i saw that it was up trending for a while, meaning that it was trading between the middle and top VWAP.

Recently, news came out regarding the spring would be warmer than expected causing the price of /NG to plummet. It began to recover this day, but I thought that it would continue to downtrend.

This was my first mistake.

By deciding to trade against the trend, I chose to take “short” position in /NG even thought it was up trending. By doing so, I bought near the middle VWAP in the hopes that it would break below and continue to make me a profit.

Second mistake, hoping.

What I should have realized is that the pattern was against me and that I needed to get out of my position.

This was actually one of my luckier trades because I came out green after holding for over an hour.

I do not take any credit for being green this trade, it was truly a combination of sheer luck and patience.

Moving Forward?

Moving forward, I will only take a position after confirmation and will only look to hold about 20-25 minutes.

I have had a bad habit in my last two trades of holding for an hour plus when things did not go in my favor, and not selling at any signs of a resistance.

So in the future, I plan to be a more conservative trader, locking in profits whenever I can, and overall being a more consistent and profitable trader.

I hope that I have provided value to you as a trader in order to help make your next trade profitable!

Thanks for reading!

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Have a great day!

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