The typical flyer on an airplane possesses a round trip airfare ticket. The intent being that the traveler is flying to a destination, then returning at some later date. In trading however, this is not common at all. The vast majority of trade setups involve a Long position, or a Short position – a one-way ticket if you will. Each position is opened, managed, and then closed.
So, what am I really talking about here: “Going Both Ways”? Let me show you a recent chart of CMG – a stock that I traded in both directions (note the box area):
I was short CMG and noted on my blog here. Once CMG approached the rising 50 day moving average below (even dipped through on one day) I tightened up my stop. Once the stop hit and covered the short, I monitored the Stochastics indicators closely as they were bottoming. Buyers clearly began showing up so it was time to assess the next opportunity.
Now what? Was my short approach wrong? In the context of my timeframe for the trade I had on, the answer is no. However, in the context of other timeframes, this would be viewed as a simple pullback to a moving average.
With that mind, I focused on a setup to go Long – time to go the other way. Based on the move noted on the chart above, the price did work its way back up near the upper Trend Line. It currently is hovering around the 275 level.
So in summary, one needs to always be aware of their timeframe for a trade they put on. This is especially true if you find yourself going both ways.