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Chapter 19, Part I. Harmonic Approach to Recognizing a Trend Day Page 9

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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    Chart #7 | 5-min EUR/USD

    #6 – Enter at 1.4303 – 14 pips lower than the high. Stop should be at 1.4277 – just below the upper border of sideways consolidation - excellent place for stop, by the way. Here we also drag stops of positions from #2, #3 and #4. Initial target is 1.4303, then stop to all rest positions drags to the low of #6 pennant. Later you can see that the market retests this level and stops are triggered. Alternatively, you can exit at target of rectangle – it has shown on the chart. So, you have at least four halves of positions that equal 2 your lots that you can hold through the whole trending day with no risk.
    Pipruit: That’s amazing, Sir, really cool stuff.

    Commander in Pips: But do not get your hopes up with such a result. This
    is a bit idealized example, and its purpose just to show the way to think during these days. Very often trending action could fail at any time. So, you can get just small profit. Also there is a solid probability that you will skip some entry points. Still, it’s worthy to trade.
    Pipruit: When you say about “lot”, “half of position” – about what particular size are you speaking?

    Commander in Pips: Right. This depends on your account value. As you remember, our rule is not to risk more than 2% of total assets in any single trade. For instance, if your account equals 5000 $ and our stop 26 pips, what is your maximum position?
    Pipruit: 5000*2%/(0.0026*100 000) = 0.38 standard lot. Ok, so, the halves, that you’ve spoken about are 0.19 lot, right?

    Commander in Pips: Bingo!
    Pipruit: And the last question – you’ve used 14 pips retracement to estimate entry point, since this is 0.382*EUR harmonic number. And can I use, say 0.5 or even 0.618 retracement*harmonic number?

    Commander in Pips: Absolutely. But in this case you probably will miss some entries, since all retracements except #1 and #4 did not show so deep a move down. Form the other side – you will get tighter stops and will be able to enter with larger volume. This is the object to choose from – more entries with less volume or rarer entries with greater volume.
    Pipruit: …or no entries at all, if the trend is really strong…

    Commander in Pips: Heh, you understand right – we can’t exclude this possibility also.

    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.

    FPA ranks are earned in the battles against scam, not in the classroom.
    #1 Sive Morten, Dec 21, 2013
    Last edited: Dec 21, 2013
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