- 15 Mins Special Bars
- Momentum Analysis – Part 1
- Momentum Analysis – Part 2
- Momentum Analysis – Part 3
- Quick Recap
In my opinion entering a trade is relatively easy; exiting is a totally different ball game. No matter how long you trade the markets, there is always a nagging feeling that what if you would have let the trade run a little longer, or had closed it a bit earlier and saved it from hitting Stop Loss.
It is a challenge to overcome this psychological problem and as a trader our job is to minimize and work around these doubts.
A simple solution is rather than using discretionary points for the exits; we set hard exit points based on market volatility.
Markets by nature are random and unpredictable, so when we try to pinpoint an exact exit point the results vary greatly. Instead, if we focus on what is the “market potential” today or over the week then we are most likely to reach our Profit Targets. Let me explain:
The vertical line represents open and middle of the week. Up until second line EURUSD has moved about 150 pips.
What does that tell us?
It says nothing on its own. But if we look at average of past weekly overall movement we can then see how much this week EURUSD has moved. In other words, we can use Average True Range to help us determine the volatility of the pair. Based on that we can determine how much a pair is likely to move in the current week. Of course this can only be an estimate but it’s good enough to work out Stop Loss and Profit Targets.
By using ATR we no longer rely on discretionary exit points, we now have a clear set guideline on where to exit. This also makes it quite mechanical, taking the emotions out of trading. Isn’t that what we as a trader always wanted to do?
Yes, but you may ask how does it work exactly?
We look at the past 26 weeks and calculate the average weekly move for that period. This gives us an indication of roughly how many pips a particular pair is likely to move during a week. Based on this piece of information we can safely calculate Profit Targets.
Don’t worry: You will neither have to calculate the ATR manually or work out Profit Targets. Find out how in the next section.
No TIME!! That was always my problem. This Trade Copier has been long time coming, glad it is finally here.
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