IMPULSE – CORRECTION – IMPULSE
Daily/4H/1H/30mins timeframe (select only 1)
 Price trailed by 30SMA – ensure strength of first impulse wave (✓)
 Pullback between 30SMA and 150SMA (✓)
 Corrective structure formation with 2×2 touches (✓) Pennant
 Stop order at the break of corrective structure with stop loss after swing L/H (✓)
 Stop order after price bounce off area of value with volatility stop
Additional confluences: Support or Resistance, ADX33, Linear Trend Lines, Fibonacci Retracement, ATR and Elliot Waves.
1% capital risked for potentially 2.5R
Open: xx | Stop loss: xx (-23 points) | Take Profit: xx (+57 points)
Remarks: Same picture for entry and exit…
Keying in the trade, use volatility stop placed under/above an established swing L/H or moving average cross or estimating volatility using ATR.
Real stop loss placed under/above the anticipated swing L/H using 150SMA as a guide.
Take profit calculated using the length of the prior impulse wave rounded off to next nearest swing point/key level.
Once entry triggered and break out, shift automated volatility stop to real stop position.
At 50% of 2nd impulse or a swing L/H established, shift stop to break even.
At about 80% of 2nd impulse, shift stop to the 50% mark or below/above swing L/H.
If price breaks and closes under/above the 30SMA, tighten stop loss and prepare for manual exit.
 Initial stop loss
 Trailing stop, as mentioned under management
 Manual exit due to change of momentum and break of market structure
 Take profit
Remarks: Oh well what can you do, traded a continuation pattern in the direction of the trend… It was at daily resistance though, that should have been a factor for the trade to be avoided.
Another example on why risk management is the most important. That was a weak pennant by the way, only clear on the 15minutes timeframe – that does not meet the criteria for a trade to be taken. DNF