My account might be in trouble: What now? (PART 2)
The next day...
So here we have crude oil, massively dropping which renders our back up plan sort of useless. This can seem frustrating for the novice trader, though it is a manageable situation which can be turned into an advantage. The only drawback is the holding period, since we have a BUY now at 63.495 which is in loss. Could or will crude oil fly past the $65 mark sometime in the future? It is pretty much a guarantee since any uncertainty in the markets or another threat of war is almost a certainty at some point. Do not forget, fear and greed drives the market and crude oil makes major movements due to its dependence on fear.
Now what is the next step? Simple, we have a tight ‘lock’ at the top with 1 BUY and 1 SELL. Note I have deleted the SELL LIMIT trade at the very top. The rest below are active SELL trades. Our next step is to wait it out for the price to drop below $56 per barrel and then we have the option to remove 2 SELL trades at the bottom. Assuming this happens, this leaves us with the ‘locked position’ on top with the 1 BUY and 1 SELL. Now we have limited our risk to just less than $15.
However, keep in mind time has passed by (assuming Crude drops to where we want it to) and we want to continue making money here. Obviously I expect a ‘pullback’ by Crude after the big drop, thus am look into buying again. Where would you assume the drop to end? Our first reference is the major support points, where we have one at $50. That could be a decent buy point. Another one we have would be around $45.8.
You might now question, what if crude drops to below $30? Maybe even $20? Well, no guarantees from me that it wouldn’t! Our trust in price range comes back to fundamentals though, as crude oil will never go to $0 unless we have a major global apocalypse, for the same reasons why Gold and Silver would never go to $0. Oil is not used for just fuel, it is used to fuel mankind through various petrochemical products, energy, beauty products, and cooking! Crude oil will always have value, and the Russian, Chinese and North American governments are not fools to stockpile millions of barrels in their backyard for use on a ‘rainy day’.