TECHNICAL ANALYSIS
FX
Figure 3: Trailing a stop using market profile short e r int raday charts .
As the ma rket moves in your favour away from the moving averages ,
the moving average
can act as a stop guidel ine for you to move your stops according
to where the
moving average is positioned. An example of this can be i f you are in a long position and the pr ice is above the moving
keeps moving high above the moving
average. average,
the moving
average wi ll move higher and fol low the pr ice. Now once the pr ice crosses below the moving average the stop can be trig gered.
ATR can be very useful when measur ing ma rket volati l it y. A standa rd ATR can help measure a normal range of ma rket movement , therefore, with the ATR indicator, you
I f the pr ice
Ma rket prof i le is my favour ite for
intraday trading (i f you
a re not awa re of ma rket prof i le cha r ts I recommend reading the book f rom Peter
Steidlmayer). What we do is establ i sh a mean pr ice. Once this is done we can look for standard deviations and place stops outside those deviations dur ing range bound market s and during trending markets (double or triple distribution). We can move the stop loss in l ine with the next va lue area or single print as the price gets higher
and
can keep the stop loss at ATR - this means that when there is a very volati le move you can secure your prof its or not lose too much money when the ma rket moves aga inst you.
higher. Another
impor tant part of MP Char t s is that if we are expecting a mean reversion we can have a very tight stop loss above a single print.
In Figure 3 we have an upward trend and what I am looking to do is place the stoploss at the bottom of the lowest print in today’s
session marked by
an ar row. Then what I am looking for is the trend to break upward and find a new
Figure 4: Placing a stop with Point&Figure charts
FX TRADER MAGAZINE April - June 2016 57
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