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Chapter 15, Part II. How to use Pivot points. Page 7

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

    Aug 28, 2009
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    Commander in Pips: Ok. Now let’s discuss some technical momentum of breakout trading. As we’ve pointed out, the trading of pivots breakout has much similarity with trading rectangles. For that purpose we should look at couple of pivot lines as a rectangle, although not in term of price action but in term of borders placing. Say, WPP and WPS1, or WPP and WPR1 and so on. We need this for better explanation where to place stop loss order.

    Chart #2 | 60-min EUR/USD and Weekly Pivots

    So, here we see how the market has broken WPP and then WPS1. During the first breakout – there was no retracement back, so if you are a follower of conservative approach, you had to skip the strong down move. If you’ve applied the aggressive way – then you have to place a stop above the middle level of the distance between pivot lines (like on rectangle breakout trading).

    The second example is a breakout of WPS1. Here, if you apply conservative approach – you’ve gotten a perfect entry during retracement back to WPS1 (here it will act like resistance now) in a calm environment and also you can place tight stop – just above the broken line. Because if the market will return back, it tells that this was a false breakout. Applying the aggressive way here will lead to almost the same entry point, but your stop will be placed two times higher.
    Pipruit: Hm. And why does applying aggressive way of trading mean we can’t place stop closely as with the conservative one – just beyond the broken line? In the first example we could do this.​
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