Trade Price Response

What’s the plan, Stan? Let’s take a look at our trade price response.

A trade price response is a trader’s game plan for a security once that security reaches (or fails to reach) a certain level. We’re talking resistance and support levels, which can be drawn based on multiple technical analytic methods.

For instance, say a security is doing its thing. The price is going up and down. Based on one trader’s technical analysis, he’s got his support and resistance levels for the stock; let's say the resistance level is $20 above the stock’s price. The trader decides that if the stock hits that level, $20 above its current price, he’ll be in it for the long haul. If the stock keeps bouncing around, or even slowly rising towards that $20 increase, but doesn’t make it within a certain timeframe, he’ll enter a short position on the stock, i.e. it's not worth it for the long haul. This is the trader’s trade price response.

What’s the point in using all these technical analysis tools and gadgets if you don’t know what your goal is with them? You’ve gotta combine your tools with your trade price response to have an action-oriented plan.