ANZ Trade 3
This is the third in a series of articles examining the performance of trades in ANZ Bank (ANZ.ASX) from the year 2020. The trade from this article was entered while the trade from the last article was still open, however exit stops for that position had already been moved to break even – removing the situation where two units of risk are exposed in the one market at the one time.
The setup for the third trade occurred in late October of 2020. Three solid price reasons clustered at an average price of $18.57, and the market was trending strongly down towards this level. On 29 October, the market reached this level, and with strong enough evidence a reversal back to the upside was anticipated. As you can see in the ProfitSource chart below, the market only false broke the price cluster’s average by 5 cents (5 points), a small and very tolerable error in relation to the average size of a daily bar in this market. Then, the reversal began to unfold.
The most aggressive end of day chart entry (at the turning of the one-day swing chart) occurred on the 30th of October. It would have had you long this market at $18.84, with an initial exit stop loss placed at $18.51.
As for managing the position, let’s use the reference range from the September 22nd low to the 26th of October high. Stops will be managed currency style.
A bit of sideways market action soon followed entry, but then on 10 November with a strong gap up, the market had reached the 50% milestone. Exit stop was moved to break even.
On the 17th of November, the market gapped up over the 75% milestone. Coincidently, this was the same day that the 75% milestone was reached for the trade in the same market from last month’s article. Exit stops were moved to lock in some profit, by placing the exit stop 44 cents below the 50% milestone at $19.86; the 44 cents, as mentioned in the last article, was approximately one-third of the average weekly bar size at the time, based on the last 60 weekly bars.
And the market didn’t delay. The 100% milestone was reached the next day on the 18th of November.
Now for a breakdown of the rewards. In terms of the Reward to Risk Ratio:
Initial Risk: 18.84 – 18.51 = $0.33 = 33 points (point size is 0.01)
Reward: 22.09 – 18.84 = 3.25 = 325 points
Reward to Risk Ratio = 325/33 = approximately 10 to 1
Assuming that 5% of the account size was risked at entry, the gain in account size would be as follows:
10 x 5% = 50%
If 5% of a $10,000 account was risked, i.e. $500, the reward in absolute Australian Dollar terms would be:
10 x $500 = $5,000
Work Hard, work smart.
Andrew Baraniak