Trade of the week: long S&P 500
This week's trade is to go long on the S&P 500 during a minor retracement to 5963, with a stop loss set at 5771 and an upside target of 6463.
(AI video summary)
Previous Tesla and WTI trading outcomes
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Tesla trading strategies
At the start of the year, traders took a long position on Tesla's share price, highlighting the challenges and opportunities in trading volatile stocks. Initially, the trade moved into a loss but did not breach the stop-loss level set below the early January low and has since returned to profit.
For cautious traders, raising the stop-loss to the entry point can create a 'free trade', minimising potential losses. This strategy emphasises the importance of stop-loss placement in managing risk and protecting capital, especially with high-volatility stocks like Tesla.
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Risk management in oil trading
A recent short position on WTI crude oil at $77.10 against a major resistance area illustrates the unpredictability of trading commodities. The trade initially appeared promising but hit the stop-loss level before reversing direction.
This scenario underscores the necessity of adhering to stop-loss limits to prevent larger losses, even if the market eventually moves in the anticipated direction. Traders must accept that not all trades will succeed and maintain discipline in risk management practices to protect their accounts.
This week's trading opportunity
Despite US markets being closed for Martin Luther King Day, traders can still engage with indices like the S&P 500. Recent market movements showed a bounce off major support and a breakthrough of a downtrend line, indicating bullish potential.
With President Trump expected to sign numerous decrees, increased volatility is likely. A strategic approach involves going long on the S&P 500 during a minor retracement, with a stop-loss below the June low and an upside target offering a favourable risk-reward ratio.
This plan highlights the importance of timing and strategic entry points in index trading.
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