[tymen1]

Originally Posted by VulcanClassic

Tymen,

I'm not criticising, just asking;

Seeing how the price generally won't retrace past the high of the pattern, but can come close to it, wouldn't this increase the chance of getting stopped out?

Although Kenneth Lee tried to answer this one, I will answer it myself carefully.
Thanks Kennneth, for trying - that is how you improve your own work!!



To answer.....No.

The first stop loss of 9/10 pips is deliberate.
It shuts down a runnaway retrace first trade.
This works in accordance with the following hyperlink :

Weekly Trading Lesson: Making and Correcting Trading Mistakes

Each of the retraces which are traded have their own respective stop losses as seen in the diagram.

You can choose to have each stop loss different....say each one 10 pips (or less if you wish) above each individual retrace point price.

So if you have 3 retraces at prices 25, 33, 17, then you could set each stop loss at prices 35, 43, 27 respectively.

.......Or you could have each stop loss the same......that being the 3 pips above the star!!

For example, the star top may be price 35. Then you could set a universal stop loss of price 38.

The choice is yours to make.

In either case, you always lower your stop loss when the price action drops so that you break even if the price action suddenly betrays you.

Need 5 pips with 2 amounts to break even with the 10 pip stop.

That is absolutely correct. But it is also easy to make those new pips.
5 pips on a retrace is really nothing.

Remember also that this happens only when it is a "retrace first" trade.
If we have a "pips first" trade, we need not worry.

This Ultimate Candlestick Trading Method will be used exclusively in our future trading of the engulfing pattern.
You will then get a better idea of how it works and the great advantages it has.