09-26-2008, 03:50 AM
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FX Analyst
FX-Men Honorary Member
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Join Date: Jan 2007
Posts: 10,127
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Post of the Day: EUR/USD
Student's Question:
I have placed the order point, with the stop 50 pips above the high of the double top marking, and the limit at double the size of the range (of the two highs and low in between). Is this the best method for taking profit in this situation?
Power Course Instructor's Response:
Nicely done...
This is a good example of using a double top pattern to enter a trade.
A nice advantage of trading a double top/bottom is that you can be fairly tight with your stop placement...10-15 pips would be fine and that would enhance your risk reward ratio as well.
Depending on how many lots you might put on this trade, you can have multiple profit targets...see the chart below for 1st, 2nd and 3rd profit targets. As each level is achieved, a portion of the trade can be closed (locking in profit) and the stops can be trailed as the trade continues to move in your favor.
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