Well suppose the initial trade was a high prob, low risk, high potential reward one and it goes through the following stages.
It forms on RSI (at which point we enter), then it forms on Price (using RSI usually gets you in that bit earlier), the mob join in and off it goes into profit. Defining "into profit" is difficult, at the moment 20 pts or ~ 0.5% seems about right.
All is looking rosy and then it turns!
I used signals from the market to enter the trade and it was a potential cracker, looked very promising and now the market has changed its mind. I have very little attachment to my trades if they don't deliver, they are momentum trades and I prefer the momentum to be in my direction.
So I'll take profit with half and shift the S/L on the other to B/E (just in case the Market changes its mind again).
What I'll also do is set up an order to trade the breakout through the original S/L position (see diagram). I'll only use the profit from the initial trade, so the whole process is self funding.
My rationale is that something has spooked the herd, the effect of the herd hitting a previous resistance/support level can be pretty spectacular. Then again that isn't always true, so I'm not afraid to close the trade down if it gets triggered but the follow through just doesn't happen.
Maybe it's something to do with EWT i.e. impulsive wave ends, I trade the corrective, then another impulsive comes along. Why stand in its way?
cheers theory
Hi Theory
ReplyDeleteAnother thought. I think the entry on stage 6 diagram is wrong as it seems to be below point 2 - unless I have missed something.
Cheers
Zac
Zac,
ReplyDeleteThe stage 6 diagram is for Price and NOT RSI. The RSI pattern usually gives an entry on Price which is before the Pt2 entry on Price.
cheers theory