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Chapter 10, Part IX. Using Fibonacci for placing orders. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 17, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Commander in Pips: Definitely. By the way, we already have talked about this in general – when we’ve discussed how estimate has a level been broken already or not. In advanced comments to Fib retracement…

    Pipruit: Oh, right… I feel, that it sounds familiar to me. Now I remember.

    Commander in Pips: Ok, let’s shift to placing exit orders – STOP LOSS.


    Placing an Exit Stop Order (STOP LOSS)


    Here we will take a look at two ways of placing stop – beyond the next Fib retracement level or beyond the opposite extreme of a tradable swing. These are the most simple of the initial ways to place stop orders. If you want some advanced knowledge – refer to DiNapoli “Trading with DiNapoli Levels” book. It’s worth getting a copy of it.

    Placing stop beyond the next Fib retracement level


    This technique is simple. Let’s assume that you intend to buy from 0.382 level – then you should place stop below some lower Fib support levels – 0.5; 0.618 or even 0.786. Keep in mind, that although we place entry order above entry level, the stop loss order we place below the Fib level.
    Here is how it looks like:


    Chart #6 EUR/USD 4-hour
    [​IMG]

    Pipruit: Wow! I see a spinning top candle pattern, by the way…​

    Commander in Pips: Yep. Sometimes, spinning top with long shadows calls as “High Wave”. But let’s return to our business. I show you the chart even with some advanced tools. Here you can see a great thrust up. So, if you intend to enter long from 0.382 Fib support level – you may do this. Stop loss orders could be placed below 1.4047 or even below 1.3977 area. Anyway it should be placed below the support level and not above it.

    Pipruit: And where is better to do this?​

    Commander in Pips: And what are your thoughts about it?

    Pipruit: Well, I think that I choose a Confluence support. Because if the market is still strong and the bulls are still in charge, then this level should hold.​

    Commander in Pips: You’re absolutely right with this. Also – take a look, I’ve marked for you one of swings low in blue circle, that is very close to 1.3977 0.618 Fib support level. If you choose to place stop loss order below this 0.618 support – it will be better to place it below this low at 1.3962 also…

    Pipruit: Why?​

    Commander in Pips: Because if market will take out this low – it will mean that it totally erase the most recent swing up and this fact in turn, suggest that your initial context for enter long has been destroyed by market price action.
     
    #1 Sive Morten, Dec 17, 2013
    Lasted edited by : Mar 6, 2016
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