Knowing When To Take Money Off The Table (Part 5)

07/11/2008 12:00 am EST

Focus: STRATEGIES

Timothy Morge

President, MarketGeometry.com

Price did come back to re-test the up-sloping blue Lower Median Line Parallel, getting me long in the process. Once I check that my limit buy order has been filled at 113 20/32, I enter my limit sell order at the Energy Point at 114 06/32.

You can see that price spiked higher and at the close of the bar that got me long, I had a potential eight full ticks of profit in the bonds—and that’s too much money to let turn into a loser [$250 a contract]. I cancel my initial stop loss order at 113 16/32 and move it up to break even, at 113 20/32. I would move it higher, but there is no natural market structure to hide my stop below.

You can see that price traded right to the Energy Point at 114 06/32, filling my profit order. Even though I use the areas where these Lines of Opposing Force meet in my trading day after day, I am still amazed when they act almost like an elevator, pulling price nearly vertical to an Energy Point. But I see Energy Points attract price in this fashion over and over again. Once you learn to identify them, they are wonderful sign posts in the markets to use when you trade, giving quality price and time projections.

I mentioned at the beginning of this article that ‘when I take a winning trade and then do a mentoring session a day or two later and watch a student going through their own trades with me one on one and they start diagramming out the same winning trade, it really makes me smile’.  In this case, I had a mentoring session the very next day with a beginning trader that had had three prior one on one mentoring sessions with me and halfway through the session, he began to show me this same bond trade and my face broke into a broad grin. I didn’t interrupt him as he told me in great detail how he stalked the entry, how he carefully chose his initial stop loss area because there should be limit buy orders there that would act as protection for his stop loss order. To be honest, we chose different profit targets: he chose to put his profit order at the red down-sloping Upper Median Line Parallel, partly because it was the more conservative of the two targets. And he did not ‘see’ the undershoot/overshoot that I used to draw in Sliding Parallels, so he didn’t have an Energy Coil on his charts where the two Lines of Opposing Force met.

But his entry was identical and his stop was picture perfect, hidden below the prior Swing Low to take advantage of the likely limit buy orders resting in that area. And although I squeezed a few more ticks out of the trade, I’ll bet he was more excited about his winning trade!

But I got the satisfaction of knowing that someone was now making money using the methods I taught him. And odd as it sounds, I probably got more satisfaction from him seeing and executing that winning trade than I got when I made the same winning trade the day before.

I wish you all good trading.

Timothy Morge
tmorge@sbcglobal.net e-mail me
www.medianline.com
www.marketgeometry.com

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