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Chapter 19, Part I. Harmonic Approach to Recognizing a Trend Day Page 8

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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    #2 – That is our first entry possibility. We expect some retracement, since the market has reached 1.0 Fib extension target at 1.4236. Our entry level is 1.4224 – 14 pips lower from the recent highs at 1.4238. Initial stop will be placed at 1.42 – 24 pips lower – all is according to our initial trading plan. We do not change anything. Enter, as usual with harmonic patterns, we’ve made with double position. Also pay attention that our stop is below previous swing high, where initial AB=CD has started – that’s additional support. The major observation could be done, based on type of price move to 1.4238. See – market accelerates right to 1.4236 and has not shown any retracement, when hit 0.618 extension target at 1.4213. This tells us, that we can count on move till 1.618 at 1.4274. Take a look at how harmonic numbers work on trending days – we’ve entered right at the low of flag pattern. Our first target on the first half of the position – 24 pips up = 1.4248. When th market continues to move up, we move stop loss on the other half right below the low of flag #2 – almost at breakeven point. Hence we lock in profit the rest of this position and can initiate any other, since our risk now is zero.

    – Here we repeat all the same, that has been done with #2 point. Our entry Long will be at 1.4255, since the high was at 1.4269. Initial stop will be placed at 1.4230 (in the middle of flag #2 – does not shown on the chart). When market continue up further – you may exit at 1.4274, since this is 1.618 target or wait a bit longer and exit at 1.4281, because this is 26 pips from our entry point. To be absolutely honest, probably it makes sense to skip that trade, or take some risk with placing tighter stop, because if your profit objective is 1.4274, then your potential loss is greater than profit. That’s not good. Form the other side, the market could not reach 1.4281, since target is 1.4274. If you still decide to trade it – you may place a tighter stop. As we can see here – you will get the profit, but this is just current case. In general, better to use risk/reward ratio no less than 1, as we do. So, exit the first half at 1.4281 and place a tight stop just below the low of flag #3 for both halves of positions – from enter at #2 and from enter at #3.

    Chart #7 | 5-min EUR/USD


    #4 – When market has reached highs after 1.618 target and turns to retracement, we, again, enter 14 pips lower at 1.4272 with stop 1.4246. Here we should wait a bit, since the market has turned to sideways action, but our stop has not been triggered. Target of the first half of position is 26 pips higher – 1.4298 – right at the up border. Second target you may estimate by yourself – either just use a trailing stop and hold the second half of position or use the classical approach – target is a width of the rectangle, so as we done here… But any scenario is acceptable.

    - We skip this pattern, since retracement was even less than 14 pips. But it gives us important clue. According to classical technical analysis school - if market forms flag right below up border of sideway consolidation this is an early notification of breakout. So, we wait….
    #1 Sive Morten, Dec 21, 2013
    Lasted edited by : Apr 17, 2016
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