FX TECHNICAL ANALYSIS
where the stop order has been trai led,
to the lowest
point of the cloud. In conclusion,
thickest technica l Figure 5: Trailing a stop using Ichimoku Charts va lue area higher and move
the stoploss to the next single pr int under that new higher value area .
Point & Figure char ting is di f ferent altogether as it has predetermined stop losses if used correctly and this is based on the leng th and velocity of the move. I feel P&F char t s are amazing at pointing out supply and demand ba lance areas and if
the pr ice moves
away where the next area of ba lance maybe. For ri sk control this makes per fect sense as if a position goes against you it wi ll give you an idea of just how much ri sk to lay down for the position.
In the example shown in
figure 4 we have a break of a consol idation area and the stoploss is just above. When the break moves
further down the stop order can then be 58 FX TRADER MAGAZINE April - June 2016
moved to the ar row to lock in some profit .
Ichimoku Cha r ts are ver y sel f-explanator y with rega rds to s toplos s
placement .
My favour ite way of us ing this method for stop loss placement has to do with the measurement of the cloud thickness. If the cloud surrounding
ana lysis can be a major tool in limiting losses and al so keeping hold of prof its in trends . Pr ice action can show you where other traders feel strong level s are, and you can avoid obvious areas to place a stop loss. However there are l imitations to all trading and money management strategies so system testing is ver y impor tant before employing one par ticular method.
Even if you consider yourself a fundamental trader, technical ana lysis can give you an edge by protecting
your positions the
pr ice is thicker, in my view it means that it wi ll take more momentum for pr ice to break through. Bear ing this in mind, I then tra i l the stop losses once the pr ice has broken through the cloud underneath the cloud fol lowing the trend.
In the cha rt shown in figure 5, the trade ent ry is ma rked with the fi r st ar row, with the stoploss placed below the thickest point of the cloud. The second ar row shows
and limiting your losses. But the greatest benef it of using technica l
ana lysi s for stop
placement is the peace of mind it gives you. Knowing that your risk is always limited and your prof it is locked can only help keep the mind at ease and we all know how stressful trading can be, so having peace of mind using technical ana lysis is a major benef it .
Rajan Dhall MSTA
Market Analyst Ransquawk
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