Pipruit: And why we can’t just jump in after confirmation of breakout? Commander in Pips: Well, in fact you can do that, but you have to answer on couple of questions – where do you intend to enter and where do you place your stop loss? Pipruit: Hm, well, I jump in right on the next bar, after breakout one… Stop… it’s much harder. I will just place money stop, say, 2% of my assets. Commander in Pips: Well, in this case we both see that you have made profit, because there was no retracement after breakout. But, if you trade a wedge, say on hourly chart, and market breaks the wedge – it could run fast, so you will enter at a worse price, because the market does not show any retracement lower. Second, your stop has to be protected and logical. In other words, it has to be placed at such area, which tells you that your position is wrong, if market will reach it. For example, in our case – if market will move below 0.786 support, then trend turns bearish and bullish engulfing will fail – hence we have no reason to hold long positions. In your case, if the market even will show some pullback and your stop will be triggered, this absolutely does not tell you that market has changed direction. Pipruit: Looks like you’re right. Commander in Pips: You can see that in all charts that we use as examples, MACD shows trend shifting before breakout and holds it during the last swing inside the wedge. This happens very often. So, use all tools in your trading arsenal to estimate early prompts of a possible breakout. It’s better to have a position before the breakout moment. Even if you will miss some wedges and will not see clues in the necessary moment – it’s normal, it’s better to skip some trades, than to loose money. Try to apply strict rules, at least in the beginning – you will definitely miss some good wedges to trade, but you will miss even more wedges that are better not to trade at all. P.S. This lesson was written by Sive Morten, who has been working for a large European Bank since April of 2000, and is currently a supervisor of the bank's risk assessment department. Sive's knowledge of forex market and banking industry is vast and quite complete. If you have any specific questions about forex, banking industry, or any other financial instruments, please post them on the next page and Sive should answer soon. Note: FPA ranks are earned in the battles against scam, not in the classroom.