ION: Range Trade Play (Range trading lesson)

Ionics, Inc.

Range trading setup on ION.

Support zone = 2~2.1
Range trading band = 2~2.3 (can adjust the 2.3 upper band when using trailing stops, doing profit run, or depending on your risk level)

Trading Plan
- Buy/Accumulate at support zone (the closer to 2 the better).
- Sell near the upper band around 2.3 (initial TP).
- Stop-loss at 1.94 (can be adjusted depending on your comfort zone for the risk/reward ratio).

Notes
- Assuming you can get it around 2 and sell at 2.3, your risk/reward ratio is around 1:5 (a probability of winning 5 times the risk).
- Assuming you got it at 2.1 and sell at 2.3, your risk/reward ratio drops to around 1:1.25 (relatively higher risk but still doable if strictly implementing the tight stop).
- Alternative profit taking method is to use a step up TPs and use trailing stop to protect gains (set initial TP > once initial TP is hit, adjust stop-loss to break-even...and move up from there in TP steps).
- Another profit taking method is to profit run the rest of the position with trailing stop after initially taking profit at first TP (use percentage points on trailing stop just below the initial TP).

Potential result
- Using 2~2.3 trading band with 1:5 risk/reward ratio, the potential gain will be around 15% with the risk of losing 3% (excluding charges).
- With 1:1.25 risk/reward ratio, potential to gain 9.5% and a risk of losing 7.6% (excluding charges).

Remarks
- The trading plan above is just to demonstrate a logical approach to range trading and avoiding impulsive buying.
- Impulsive buying usually comes with indecisiveness when to take profit resulting in a potential gain that eventually turn into a loss (gain na sana naging bato pa).
- Stop-loss is there to minimize your risk (losses) and survive to trade another day. Avoiding a scenario of a short term trader that becomes a long term investor (dahil naipit).
- Higher risk/reward ratio insures that you will potentially remain profitable over the long run despite some bad trades hitting your stops.

Additional Notes
- Never let a winner turn into a loser.
- Risk can be predetermined but reward is unpredictable (never trade without a stop-loss).