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Chapter 8, Part V. Lines summary. Page 5

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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    Trading the lines

    We strongly do not recommend to use any line types as a single context for trading. You should use lines as an additional tool in overall trading plan and trading context.

    In general there are two possibilities to apply the lines in trading – when line holds or when it broken by the market. First scenario is trading of a bounce or pullback, second scenario – is trading of breakout.

    Bounce

    The major task is to shift the probability in our favor. So, using the confirmation and “proper entry” after the bouncing from the line is a tool of shifting probability in our favor. The point is that the market itself shows us the strength of some line, with price bouncing from it. You should open a position after the bouncing – with this approach you avoid loss in numerous situations when the market runs through the line as push of gangsters and breaks the line.


    Breakout

    Our philosophy here is J. DiNapoli proverb: “Loss of opportunity is preferable to loss of capital!" So, although sometimes entering the market in anticipation of a breakout could lead to profit – this is more of a kind of gambling, because you never know will it be true breakout or false. This is even more dangerous due to possibility of stop licking appearing. That’s why we recommend trading breakouts after a pullback to the broken line after the breakout has happened. Our way definitely leads to missing some trades (because market not always returns back to line), but at the same time this approach has a lot of advantages:

    1. You do not need to guess about “solid move after breakout”

    2. You have a confirmation from the market by failure to return right back above/below the line

    3. You have a better opportunity to place stop loss order and your stop loss order can tighter to significantly reduce risk.

    4. Very often your entry level will be even better compared to entering with the initial breakout.

    5. All you need to succeed in this kind of trades – is a bit patience to wait the right moment to enter the market.




    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.
     
    Hamza Samiullah and fran alvarez like this.
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