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Chapter 35, Part II. Ways to Place Stop-Loss Orders. Page 4

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 28, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Aug 28, 2009
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    Stop-loss placing with trend trading

    Commander in Pips: The second scenario is more sophisticated since the triggering moment here is trend with a combination of support/resistance lines – as classical as Fibonacci. We will look at it with more details. Still it is very simple to understand the invalidation point – this will be a trend break in the opposite direction. But to clearly understand the total framework we have to specify different tools as strictly as possible:

    1. To trade the trend we need corresponding momentum. This will give us more confidence and the trade will be safer. Momentum is determined by the thrust.

    2. We will treat thrust as the number consecutive bars – 8-10 at minimum, so that it does not close below 3x3 DMA, as in the picture. You may apply different rules – softer or stricter:

    Chart #3 | EUR/USD 60 min

    Actually, the market could penetrate 3x3 DMA but should not close above it. If it even does not touch it as on the picture – much better. A gradual thrust is better than interrupted –when the market shows 1-2 thrusting candles then consolidation and then again 1-2 thrusting candles. Although this also will be a thrust, if uncrossing condition holds, but this kind of thrust is a bit worse than a gradual one as on the picture #3.

    3. We need two time frames to trade the trend – call them as “Context time frame” (higher) and “Entering time frame” (lower). Thrust should be seen on “Context time frame”. Higher time frame will show us the trend direction, while the lower time frame we will use for estimation of entry point. Possible combinations are: Monthly-weekly; Weekly-daily; Daily – 4-hour; Daily-hourly; 4-hour-30-min; hourly-15-min; 30-min-5 min and so on.

    4. We will use MACD as trend indicator at both time frames. You may use any other indicator, for example moving average – the framework and technique will stay the same.
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