Anatomy of a Swing Trade-Sugar

Click on the chart above to enlarge.

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Click on the chart above to enlarge.

The big picture chart of New York Sugar shows a market in steady decline. This type of price action is what swing traders love! We see multiple down legs, marked with the arrows. These are the points where we may consider a short trade. Periodically, as the trend lines indicate, the market pauses and then continues to fall.
Markets often have a tendency to keep moving further in one direction than anticipated, in other words we do not want to be buying sugar while the downtrend is intact!
The second chart shows in detail, how a swing trade progresses. This trade was entered on the 24th May and lasted just short of three weeks. At point A, we were alert for a possible breakdown of the three week consolidation, shown by the red trend line. Any break below this line gives a clue that the sellers were in control and prices may fall. An order in the market was filled at 15.72, then sugar dropped.
Note: we didn't "know" the price would go down, but the odds were in our favour and worked out for this trade. If sugar had unexpectedly risen, the stop loss lines, marked in green, would have taken us out of the trade. If we are proven wrong by the market, the correct action is to exit. We never try to be "heroes" and hang on hoping for a successful outcome!
At point B, sugar hits the target of 14.57 and half the trade is closed, with a profit.
The stop is progressively tightened, shown by the green lines, until the market takes out the remaining part of the trade at C, for a nice 1R profit.
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