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Chapter 15, Part II. How to use Pivot points. Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Trading breakouts of different pivot lines

    As you know I’m not the big follower of breakout trading. In fact, all that we’ve discussed in topic dedicated to support/resistance line trading and rectangle trading is applicable to pivot trading. Pivots are just another sort of support and resistance, but they are support and resistance. Professionals rarely trade breakouts as the public does. If they expect some breakout - they prefer to have a position prior the breakout itself or open one on some retracement following the breakout to be a very wise rule – “Buy deeps and Sell rallies”. That’s why they are absolutely calm during the breakout and leave all turmoil to the public. Market makers also like it when the public trade breakouts, because the public open positions right before, at or right after the breakout. Thus lets market makers make some fakes to grab the public’s stops.

    So, there are a couple of ways to trade breakouts – aggressive and conservative. The aggressive way assumes that you enter right at the moment of breakout, while conservative way suggests that you enter in the direction of a breakout during the first retracement back towards the broken line.

    The aggressive way has only one advantage, compared to the second, conservative way. It allows you to take a position if the market will not show any retracement after breakout.

    The second way is safer and closer to what professionals do. Also with the second approach you can place a tight stop. The weak moment is that sometime the market will not show this retracement and continue to move higher.

    When you need to make such choice always follow the rule – “Loss of possibility is preferable to loss of capital”. From this standpoint the choice is obvious.
    Pipruit: Your explanation is so logical and simple. Thanks.​
     
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