Riding the Waves: Managing Longer-Term Position Trades for Larger Profits (Part 1)

05/12/2008 12:00 am EST


Timothy Morge

President, MarketGeometry.com

Many traders look at longer-term charts and see the large moves that can occur on these longer time frames. But not many traders catch these large moves. Is it impossible? The key to catching these large moves is using a low amount of leverage to limit your exposure, finding a high probability entry set up with an initial stop loss order that is tucked above or below a market formation and then using sound money management orders to 'box in' profits as they accrue.

Let's look at a daily chart of the euro FX futures from early April, 2006:

You can see that the euro had appreciated significantly against the US dollar after September 2003 and then began a fairly steep pullback. As always, the question is this: Has the longer-term trend changed to the down side or is this a pullback in a long-term up trend? Price does turn back higher and begins climbing above prior swing highs but it then trades lower and briefly moves below the lower median line parallel. When price closes back above the lower median line parallel, it is a sign of strength and that strength is further confirmed when price makes a new high for this move, breaking above the prior swing high.

More tomorrow in part 2.

Tim Morge
tmorge@sbcglobal.net email me

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