Liquidity is always a consideration in any trade. More so, if you're into trading a down trending stock. The consideration 1st should be the liquidity of the trade. In a down trending stock, bottom picking or dip picking, depending on your assessment of the trend, may make your assessment differ from mine. It will be decided by your choice of trend based on the big trend, medium trend or a spike within the down trend.
Trading a down trending stock is much like catching a falling knife... you can die the death of 1000 cuts.
Buying the lows on a down trending stock dictates a sell the top strategy. This is a very different concept than a buy the low strategy for a rising trend. You will be a rouge swinging gorilla trader.
Remember, if your buying dips on a downtrend, your counting on upswings from bottom pickers to give you a few pennies on the move to the top bollinger. In order to sell the top when it reaches your goal, or if the trend starts to turn against you (which it already is), you must be able to liquidate your shares quickly.
As an example... keeping the risk down requires you to consider a purchase of shares probably not exceeding 10% of the average bid dictated by the restraints of your pocketbook.
Trading a down trend often resembles day trading. On a downtrend, buying the dips won't last much more than a few days at most. You are really pushing your skill to last longer than three (3) days waiting for the top.
A dip is a volatile drop usually along the lower bollinger. (lower bollinger skid) and there is a few tricks to catching the cusp of the bounce.
If a 10% purchase of the average bid is made where up swings don't allow for a 20% return on a sell the top strategy selling to the bid, then you shouldn't be trading.
A real gorilla trader wouldn't be trading a downtrend anyhow, so you probably shouldn't be trading, unless your averaging/swinging into a bottom pick, where the rules of engagement are clearly defined.
Shorting in general as of Feb 19 2009, as a consideration at this late stage, is next to suicide unless your really well repaired.
Gorilla Simple.
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