Have a look at this 4 hour chart >>>
By
tymen1 at 2008-05-01
In this chart we see an evening star in the middle of the picture right on the BB. In this one the 1st green candle has risen far too fast and the red candle is far too short but since the lower BB is flat and the upper BB with a bend in it after the 2nd candle, we will consider it anyway.
The 4th candle is the first trade candle. It is a red candle telling us that the price went down after short entry but...........
what a small candle!! If we enter with 2 lots, do we exit with one lot at the bottom of this candle?
Assuming we could find the
exact bottom of this candle, how many pips do we make on exiting the 1st lot?..........about 7 pips minus 3 for spread=4pips!!
Now what good is that? What great thing will that do for us? Nothing really. I think we would be better off staying in the trade with 2 lots !
The next candle (green) begins a
retrace which continues with the candle after that.
Looking carefully at the
smaller time frame chart shows that it is
not possible to properly detect the low point of the 4th candle (entry candle).
With the Bolinger band.......NO
The Keltner channel.....Nope
The Starc bands......Nope
The Stochastic then.......No again!
In that case, it is better to stay in the trade with 2 lots.
However, it is reasonably easy to spot the retrace top in a
smaller time frame chart with the above indicators.
The best is the upper Starc band followed by the upper Keltner set at period 4, factor 1.
The upper Bolinger band also comes to great assistance here.
Last is the Stochastic which shows the top
after it has occurred.
Knowing this allows us to add a 2nd lot near the top of a retrace if we enter with only one lot. (same as allocating half our trade to start with).
This knowledge from this chart, together with the observations from the last post allows us to come to some definite conclusions next post.