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Chapter 19, Part II. Indicators’ Application for Estimating of Trending Market. 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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    Pipruit: Well, Sir. This way is much easier to apply than BB and some others you’ve taught me. But still, a lot of questions are rising.

    1. Can we enter not after the trend reestablishing, but right from the Fib level?

    2. Why do we place stop above the swing high. May be we can place it, say above, 0.618 retracement level?

    3. Can we use other targets?

    Commander in Pips: Good questions, son.

    1. This could be done, but this is more risky way. You can apply it, if some upward AB=CD pattern makes an Agreement with some Fib resistance. Second, if the market reverses from, say, a 0.382 resistance and MACD holds a bear trend. But here you need some reversal patterns on the 5-min chart to justify entering. I’ve pointed out the safest way how to approach to such situations. All other ways are possible, but they demand some experience and other confirmation signs from the market;

    2. It’s possible. But you want give the market some room to breathe. You have to keep a balance between absolute risk value and effectiveness of stop placing, just not to be stopped out occasionally. The way how we place the stop here is logical, since if the market will return right back and trigger our stop it will tell us that there is something wrong with continuation, or that the market intends to show AB=CD retracement. You also need some explanation, why you intend to place stop just above 0.618. If market will trigger it, will it mean that further down move probably will not happen? Hardly. At least while you have no additional tools to use for clear clarification of down move cancellation, you should be careful.

    3. You may use any other. We use the nearest, as we’ve said – 0.618 extension of the thrust. This is a bit early to talk about it. But to choose a target you need to know the direction of higher trends. In our example this is daily trend. Since we do not know anything about it – we use the nearest target.

    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 themon the next page and Sive should answer soon.

    Note: FPA ranks are earned in the battles against scam, not in the classroom.
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