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Chapter 8, Part IV. How to apply all these lines in trading? Page 6

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 15, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Pipruit: Looks like this is what you are named as “Kiss goodbye”?​

    Commander in Pips: Yep, this is it! Also, here you can see how a support trend line becomes a resistance line after breakout…

    Pipruit: But, Commander, the market does not behave in such a way all the time. What will happen if it will not retest this line and just continue its move to the downside, like on chart #3?​

    #3 EUR/USD 60-min
    [​IMG]


    Commander in Pips: You’re right in this case you will skip this trade – because you will not have an area and reason to enter. Definitely speaking, your entering order will not be filled, because the market will not reach it.

    Pipruit: But I don’t want to skip trades!​

    Commander in Pips: Ok, what do you want – trade all trades that you can ever find or to make money?

    Pipruit: Make money…

    Commander in Pips: So, what is the question then, son? If the risk is too much – just skip the trade and calm down – your money is still with you and you always can find another possibility to trade, but with better initial conditions.

    Remember this excellent proverb by the famous trader Joe DiNapoli:

    “Loss of opportunity is preferable to loss of capital!”
    Commander in Pips: Ok, as a summary to trading of breakouts I want to note follows things that are exceptionally important, to my mind:

    1. Again, we do not recommend to trade breakouts as on chart #3. If you will trade it in such manner still – do it only with stop loss order in place. A stop loss order is a must here. And strictly apply money management rules that we will learn later.

    2. Our preferable way to trade breakouts is as on picture #5. Take a note, the market does not always behave like that – sometimes it can just run through the level without any pullback. So, here you have the chance of safer trades but with a risk to not be filled if market will not return back to the line. Other words, you can miss this trade, and it can happen very often.

    3. But we think that this is OK, due to very good market philosophy: “Loss of opportunity is preferable to loss of capital!” Because you enter the market not just to trade, but to make profit.

    4. Needless to say that here a stop loss order is also a must.






    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.
     
    #1 Sive Morten, Dec 15, 2013
    Lasted edited by : Feb 14, 2016
    Hamza Samiullah and fran alvarez like this.
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