Here is an e-mail I received today:
Why do you like DUG so much? It looks to me like you are trying to pick a top in oils, just like you are trying to pick a bottom in SSO. Don’t fight the trend man. SSO is going lower and DUG is too.
Before I get to the DUG trade, let me reiterate that I am not picking a bottom in the S&P 500. I am only playing for a bounce while using tightly monitored risk management. If I’m wrong, I’ll lose a little and move on. If I’m right, I’ll make a nice chunk of change.
Here’s why I like DUG:
1. Nice looking bottoming pattern.
2. RSI breaking out.
3. Excellent volume pattern during the bottoming formation.
4. Good reward to risk ratio.
I like DUG too. The volume surge the last 6 weeks is amazing. A lot of investors seem to be trying to time a top in oil.
how are you computing the risk to reward factor that you consider “Good”?
I would like to ask what carmichael asked, how do you calculate risk/reward and what do you consider good? Can you recommend any good reading material on this subject?