How To Avoid Getting “Washed and Rinsed” in the Markets (Part 2)

07/22/2008 12:00 am EST


Timothy Morge


You can see in the chart below that as the day started, the Euro was strengthening considerably against the US dollar. These are 240 minute bars so the up trend was strong and had been going on for quite a few days with only shallow pull backs.

Experienced traders should have been hiding their stop profit orders under prior market structures. These areas, prior swing lows for example, are areas where limit buy orders have been left by other traders as entry orders to initiate new positions in the direction of the current up trend. These limit orders tend to act as protection, unless an acute pull back begins-and generally, if a pull back is steep enough to break much below these prior market structures, it's best to have a stop profit order in the market and let it 'take you out of your position' at a nice profit. Once out, you can re-evaluate the market after your head is clear and if a new trade set up develops, you are ready to take a new trade!

I am going to switch to candle stick bar style charts for the next two charts, because it will be easier for everyone to see just how dramatic the first move in this series of moves was:

This is a chart of the same period, using candle stick bars instead of a traditional 'open, high, low, close' style bar chart. I generally chart using traditional bar charts, but there are times when I am presenting material when candle stick charts can really show everyone what my eyes see when I look at a movement using traditional bars.

More in part 3.

Timothy Morge

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