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Strategies Follow Rules, But Rules Are Made To Be Broken

Discussion in 'General Forex Talk' started by mayorspread, Dec 3, 2008.

  1. mayorspread

    mayorspread Recruit

    Sep 11, 2008
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    I have been studying about Technical Analysis for about 3 years now. I have used some strategies that have worked really great. But I have come to understand that successes don’t depend of the indicator or the strategy you use; it depends on how good you use the tools you have. And for tools I mean indicators, resources and knowledge. You must have the knowledge to indentify which indicator is the best to use in a particular situation and how much of your account you are willing to risk.

    In order to make myself clear I give you an example. I develop a simple strategy. I use Bollinger Bands and a 15 EMA cross to confirm the signal and I trade under trendlines channels. So, I was trading in my 5 mins timeframe on December 1th as usual with a simple strategy. I was selling within this tunnel when I identify a very familiar pattern. At the beginning I didn’t recognize what it was, but I was shocked when I realize that I was facing a perfect Elliot’s wave formation. I have studied about this patterns formations and honestly I thought it was something very difficult to understand and very unlikely to happen. But look at the chart!!!

    So I take advantage of the situation and I enter when the 5th wave formation was confirmed. I set my target in the support trendline. When the trend hit my take profit and it cross the support trendline. As it was expected the trend continues with a trend correction. I had seen an old support level before. So after the downtrend was confirm I set that support level as my next target. In fact, when the trend touched the support level it bounced back and the 15 EMA confirm a change of direction in the trend. As I was sure of the Elliot’s waves I set the next target just below my old trenline recently form as a resistance trendline. At this point my feeling get into play and I decided to wait for the next wave confirmation. Sadly the 15 EMA become flat and the trend turns irregularly. However, I took a deep breath and I set my last target at the old support level. I wait in this position for at least one and a half hour when the price close under my take profit at 1,2679.

    All that said I have made 600 pips in this particular situation which could have only been 67 pips if I have followed just my strategy. A strategy must have its rules and we must follow them strictly. However, we must have a flexible system that allows as to introduce the right tool for the right situation.

    Strategies Follow Rules, But Rules Are Made To Be Broken « CharlesMcG’s Blog

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