Exercise 6 + Question

[DAVID KING]

Hi Rich and Forum,

Here are my charts for an engulfing candle example and an EMA crossover example. The engulfing candle would have shown a small profit, the crossover a much larger profit.

Question – To quote from the course, ‘we can use 5 min EMA crossovers to confirm signals given by engulfing candles, if a conservative trader.’

By this do you mean the 15 min engulfing candles, or 5 min ones? Is it possible to use the 15 min engulfing candles with 5 EMAs, or do we use 5 min engulfing candles? Sorry for the confusion…

Regards,

Dave

 

 

 

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[Rich Fitton]

Hi Dave, with the MA crossover confirming 15min engulfing candles thing it’s possible to use both signals in conjuction. e.g. you might spot a 15min engulfing pattern and then switch to the 5min chart to make sure you see a crossover as a confirming signal before actually trading. You don’t have to do this – it might mean missing better fill prices – but it can certainly help some traders take extra confidence in their early trades.

I’m guessing you took 1.55146 as the exit point on the 5 min chart – was 1.55054 a profit target you had in mind rather than trailing stop?

1.53937 seems a bit close to the action on the 15 min chart for a trailing stop, not sure how you found that price, was it a level from the 5 min chart? Remember how we’d usually trail the stop up under the price action as the market made new highs – I’ve attached a screenshot of how you might manage the stop on that 15min trade. The green arrow marks the break to new highs, the green line is where you might move the stop once you’d seen the break, the red arrow is the market hitting the stop and taking you out of the trade.

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[DAVID KING]

Thanks for the advice Rich, yes I have gotten my trailing stops a bit mixed up, was too eager to raise them behind the price action, and this is easier to do in retrospect, next time I will apply them to a live chart.

[Rich Fitton]

One exercise you might find helpful is to find your theoretical entry point, then scroll the chart all the way to the right so the entry bar is the latest bar showing. You can then creep the chart forward in time bar-by-bar by using the F12 key. It lets you simulate making your trailing stop decisions as each bar comes to a close.

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