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Chapter 10, Part IX. Using Fibonacci for placing orders. Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 17, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Pipruit: Commander, and is it correct to apply the same rules with Agreements, Confluence levels and W&R patterns to placing stop orders? I mean following these rules:

    1. If the market creates an Agreement, then it is safer to place stop beyond this level than just a simple Fib level. The same is true for a Confluence level;

    2. If the market shows that a possible extension target is above/below Fib resistance/support area, then we should place stop orders not just above/below this resistance/support level, but above/below the target of extension. Assume that we’ve entered the market according to our rule – by placing “Buy” entry order just above the 0.382 resistance level and placing the stop below 0.618.Our entry order was filled. Then, suddenly we recognize that market shows an extension target slightly below 0.618 level. So, should we move our order below this target or not?​

    Commander in Pips: Yes is the answer in both points that you’ve specified. I show you it with simplified line chart:


    Assume that we’ve bought around 0.382 and market currently stands at C point. Initially we’ve placed stop loss order just below 0.618 level. But suddenly market starts move down, that allows us estimate 1.0 Fib extension target that appears slightly lower our initial stop. In such circumstances it makes sense to replace stop below D point. Because, market can just slightly penetrate 0.618 Fib support for completing 1.0 target and then continue its move up. It will mean that 0.618 Fib support is still in play and market just accomplished its target, that’s all…

    Pipruit: I understand. And can we place order not under the next level, but under the same level? I’m asking, because, for example Confluence levels are strong, may be it will make sense?​

    Commander in Pips: Sometimes you may, but better to act in a bit another way:

    Assume an initial up thrust and the market turns to downside retracement. You intend to buy from 0.382:

    - place the stop loss below major 0.618 support level initially – 1.3977 on chart #6;

    - If market will reach Confluence level then there is a high probability that it will show some pullback – temporary or permanent, at least after the first touch;

    - When and if it will happen and market starts to pull back from Confluence – you may move your stop loss to the level, just below the lows, that the market has made during the first touch of Confluence.

    Logic is simple – if market has turned up finally – you stop will be untouched. If it will break it to the downside - then the Confluence will fail and you will loose much smaller amount of money. Also your initial stop loss will not be hit by possible W&R of Confluence area. Besides, the breaking of Confluence will tell you, that market is not as strong as it seemed… But this is a really advanced technique.
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