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A bar later the high bar is broken (figure 34) and I am now long one contract. I change my sell stop to 2 contracts, so that if it gets hit I will sell my current long contract and go short one contract. The price for the sell stop remains the same, as this is still the most recent low bar. 58 Figure 35 Now a new higher low bar has formed (red bar, figure 35) so I raise my sell stop to 4229, one tick below the low bar of 4230. 59 Figure 36 My sell stop has been hit and I am now short one contract. I place a buy stop for two contracts at 4271, one tick above the most recent high bar of 4270 (red bar figure 36). 60 Figure 37 A new, lower high bar has formed at 4235.5 (red bar, figure 37) so I have lowered my buy stop to 4236. I will stop here, but if you had traded this strategy on this day you would have made a total profit of 138 points ( 1380) for 3 trades. See video for all the day's trades. 61 Here are a few ideas of how you could use this technique to profitable effect in your trading. As a confirmation set-up If we look again at this chart for the FTSE on July , 2002 (figure 38): Figure 38 We can see that the low bar has formed, which is a possible short entry signal, but what makes this a much better set-up is the last bar (in red, figure 38). This is a bearish bar on high volume, which suggests that sellers are in control. Also note that this is the second time, since the mornings' high, that the market has 3rd 62 tried and failed to make a new high. So at this point the market is looking very weak and we have a low bar to get us into the trade should the market break lower (figure 39); the market subsequently falls to a low 4444.5, a drop of over 100 points. Figure 39 63 Here is another example from the E-Mini S&P on August , 2002. Figure 40 |
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