Trading Trend Line Resistance

As traders, our job is NOT to predict the future, but to spot low-risk opportunities (particularly at visual inflection points) and manage open positions in real-time as new information appears each day on the price chart. A common low-risk trading strategy is taking advantage of trend line resistance level breakouts. When prices break above an established declining trend line resistance level, this level usually becomes new support on a pullback. Buying on this new support level in anticipation of a rebound provides an ideal risk/reward entry with a stop-loss just below the support area in case support fails and prices break down.

ADAPTED OPTION STRATEGY: BULL PUT SPREAD

As the upside potential is unlimited, selling premium can be an excellent strategy to create income during volatile market periods. As long as price of the futures contract remains above 2.53, this strategy will keep the initial credit received. Pairing a short put with a long put at a lower strike price helps reduce the margin required for an outright naked put position and defines the total risk of the strategy on the downside. The whole spread positon is entered for a net credit.

BULL PUT SPREAD: Leg 1

Trading Symbol HG N7
Option Type PUT
Option Strategy SHORT
Strike 2.53
Expiration JUL 17

BULL PUT SPREAD: Leg 2

Trading Symbol HG N7
Option Type PUT
Option Strategy LONG
Strike 2.48
Expiration JUL 17

ADAPTIVE FUTURES STRATEGY

Trading Symbol HG N7
Strategy LONG
Entry Point 2.661
Target 2.820
Stop Loss 2.537
Contract Expiry JUL 17

TRADING TREND LINE RESISTANCE: HG N7 JULY 17

ACTUAL OUTCOME

POTENTIAL GAIN PER CONTRACT

A target of 2.82 is determined by identifying the previous high/resistance.

POTENTIAL DOWNSIDE PER CONTRACT

If  the  price  falls  below  2.537,  the  position  should  be closed with limited loss.

Trading Trend Line Resistance happening now

AUD: 6A

Silver: SI


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