Staying Out

Sometimes you have to have little rules that help keep you out of trade setups that don’t seem quite right.

The following trade is one that I never entered – even though all the criteria was met (red below blue, pullback into red, close below lower red etc.).

MAs At Wrong Angle

Remember our rule about waiting for the MAs to be angled in the right direction?

Here’s an example of a trade that we miss - because the MAs are angle upwards instead of downwards.

This is the way of trading. We miss this winning trade by sticking to our rules – but next time our rule will keep us out of a losing trade too!

Deep Pullbacks & Shallow Pullbacks

You will find that you typically get two types of pullbacks: Deep and Shallow.

They are both valid.

However, you will instantly recognise that the Shallow pullback is going to typically have a much smaller stoploss than the deeper pullback.

While not essential it is preferable as this means, while our take-profit will still be 1.5 times the initial pips risk, it will be smaller in terms of number of pips – and so more likely to get hit!

Take a look at this example of the two pullbacks in action:

Lower Timeframes

Now, the standard exit method (taking profit at 1.5:1) works well – but on lower-timeframe charts such as the 5-min and 15-min I will quite often just take what I can.

I do this by trailing my stoploss behind the last two candles. For example, see these trades taken intraday on the 5-min chart: