Here are my observations from today's trade in Ramco Cements Ltd. Below is the 5-minute chart of the same. The opening candle is marked in the chart. We can see that it's a small Gap up opening with respect to yesterday’s close.
At 10:00, the stock found Resistance near the current weekly
pivot 'P' and started retracing. I felt it was early to call a short trade. In
fact, there was even price-RSI divergence present. I missed first opportunity
with favorable Risk-Rewards ratio.
Nevertheless, the stock once again found Resistance near the
same weekly pivot at 12:00. There are two candles with wicks on upside their
body. There was price-RSI divergence. Once the confirmation candle was on the
scene, I put on a short trade.
The trade details are as follows. Entry point is at 967.2, target is at 957.3, and the stop is at 972. The Risk-Rewards ratio was 1:2. Since there were 5 points of risk position sizing was called for in this trade.
Now, as the trade was on, I noticed, the price-RSI divergence had bigger width. I also noticed price stalling near 965 where RSI started to consolidate near 40 levels. These two reasons were enough for me to close the trade since I wasn't comfortable with the visuals.
Anyway price shot past my entry and my stop was spared by just few 0.2 points. At this point, RSI was taking support above 60 levels. Since there was an opportunity to reduce the risk and more so supported by winds blowing against the plan, I closed the trade manually for 3 points loss. Please see the chart below to find the price bulldozing my stop a little later.
Lesson:
Continue to actively manage the trade throughout the trade.
Price-RSI divergence width must be taken into account in future trades.