Riding the Waves: Managing Longer-Term Position Trades for Larger Profits (Part 3)

05/14/2008 12:00 am EST


Timothy Morge

President, MarketGeometry.com

Good things come to those that wait, or so I am told. About five months later, after an orderly climb, price climbs above a prior swing high just above 1.3450.  When price makes takes out this swing high, I cancel my initial stop loss order and move it below the latest swing low, at 1.2888. I have a nice profit locked into this trade now [more than 300 ticks], but I think this is just the beginning of a major move higher. My goal on this trade will be to catch a ride to the median line, a move more than 800 points from the current price. To do this, I will have to strike a careful balance between protecting my 'boxed in' profits and not moving my stop profit orders too close to the current price action.

Longer-term trading takes patience and attention to detail. Several months later, price makes what appears to be a significant high and then sells off to test the up sloping lower median line. It then bounces out of the hole. When it makes a new high for the move, I move my stop profit order from 1.2888 to just below the swing low at 1.3306. Once again, it is a balancing act of protecting some of the potential profits I have in this longer-term trade while still leaving my stop profit orders far enough away from the current action to give the trade the freedom to mature and hopefully trade up to meet my profit target-the up sloping median line.

After making a new high, price again sells off, this time breaking through the lower median line parallel and tests the sliding parallel. Because I am less than 100 points from being profit stopped out of my original position as price tests the up sloping sliding parallel-and I still have almost 500 points in profits-I add a new long euro position at the test at 1.3386. I use the profit stop I am already using for the first long euro position at 1.3306 for this new position as well, since it is tucked below the prior swing low. I am now long one unit at 1.2538 and a second unit at 1.3386.

More tomorrow in part 4.

Tim Morge
tmorge@sbcglobal.net email me

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