You realize you are now on both sides of the financials right! I guess that's one way to get a 50% win rate (assuming it continues a trend one way or the other and doesn't get choppy).
The beauty of this is that Geez lost on the first financial trade, won on the second, and yet made money.
I was thinking about this one day where we only trade in combo i.e. FAS/FAZ or any similar inverse combo(say SSO/SDS). That will surely make life simpler. - SU
He just covered FAS loss with SKF and also made profit ;-) Nice going G. Ok, every time I'm tempted to do something similar, I think of it as "revenge trading" and don't do it. So the question is, how do I know if it is ok to re-position like this?
I think he's just following his rules and both basically hit good setups within close proximity to each other. I don't think he viewed it as a revenge trade. The downside of a trade like this (not his trade but an overall strategy) is that a whipsaw can hurt you pretty good and mess up the risk:reward ratio. Think of it this way: each winning trade will always trigger the stop loss on the opposite side (if you had a strategy of pair trading these). So, you're maximum win rate on winning trades is 1:1. That is, if you risk $200 on each trade with a target of $400. To get to the $400 target you will hit a stop loss on the other side of the trade for a $200 loss. So, the pair will win $200 net if it works. However, you could have a situation where both stops get hit in a whipsaw and you lose $200 twice for a loss of $400 on the pair trade. So you're "real" risk:reward is 2:1 with maximum risk of $400 and maximum reward is $200.