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Chapter 19, Part II. Indicators’ Application for Estimating of Trending Market. 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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    Commander in Pips: This is happening because a reversal point, where market should theoretically stop, many traders treat as retracement, and those who were late at the starting point of the thrust want to join it at retracement. Even if the environment has changed and the market really is reversing, in most cases the move shows some continuation in the thrust direction due to the momentum that it has accumulated during this thrusting move. Some traders call this a “momentum trade”.

    Pipruit: I see. So what’s next?​

    Commander in Pips:
    2. Estimating potential level of retracement, from which market could start a momentum continuation. For that purpose we need Fib retracement tool, as on chart #7:

    Chart #7 | 60-min EUR/USD retracement after initial thrust down [​IMG]

    Here we see that market has tested 50%, retraced, and then broke it up. Also, the trend has turned bullish. That’s not in our favor. We need a bear trend to enter short. That’s why in this particular example, all that we can do is to wait. When the market reestablishes a bear trend, we can then enter on shallow retracement.

    3. Wait for when trend will reestablish in the direction of the initial thrust. Estimate the target. Wait for the nearest shallow retracement and enter. As on chart #8:

    See, our target is 0.618 Fib extension from initial thrust and followed retracement. We do not try to predict, where this retracement will end. All that we have to do first is wait for reestablishing of a bear trend. That has happened after strong bars down. And second, - wait for the nearest shallow retracement from that continuation move. It comes very soon. We enter at 0.382, but there was a chance to enter from 50%. You can see that market has reached the target.

    Chart #8 | 60-min EUR/USD entry point and target [​IMG]

     
    #1 Sive Morten, Dec 21, 2013
    Lasted edited by : Apr 18, 2016
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