Measured Moves: Simple, Powerful and Profitable Trading Tools (Part 5)
05/09/2008 12:00 am EST
Again, the high probability short entry method I would use to enter this market is beyond the scope of this article, but the simple and powerful measured move that gives us a near picture perfect exit area for locking in our profits is once again a simple extension of equal measured moves, combined with confluence-in this case the area where the down sloping red median line intersects with the up sloping third warning line. Those traders that were short knew to take their profits in that area of confluence [in this case, because the lines that intersect are lines of opposing force-one is an up sloping line and one is a down sloping line-and that makes this an energy point] and in fact, would use the same high probability entry method I teach to enter a long position with very tight money management stops just below the lows of the move.
Let's see if this area held and if another measured move would have helped identify a potential exit for a long position:
You can see that price indeed turned on a dime in the area of confluence [or at the energy point] and has climbed all the way back to re-test the original lower median line parallel, a move of well over $40 per barrel. As you can see on this chart, there is no area of confluence yet, so as price moved higher, I simply keep moving up my stop profit orders each time price leaves a new higher swing low. Although you cannot see it on this chart, price continued much higher and is currently testing the upper median line parallel at nearly $120 per barrel, and the simple money management technique I showed on the chart above of moving my profit stops below each new higher swing low as they unfold has kept me in this trade all the way up!
Simple measured moves, whether you were living in Phoenicia over 4000 years ago or a current active trader, are easy to use once you understand them and can help you produce tremendous profits, especially in strongly trending markets!
I wish you all good trading.