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Monday, 06 September 2010 07:02 GMT
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Stop Placement: Negative Risk Reward Ratio
Wednesday, 10 March 2010 00:47 GMT
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- Mar, 09 Stop Placement: Double Bottom
- Mar, 04 Stochastics: closing above 20 and below 80
- Mar, 02 Selecting an Indicator
- Feb, 25 The Doji as a Neutral Candle
- Feb, 24 Reacting versus Predicting
- Feb, 23 Selling Rallies and Buying Dips
- Feb, 18 RSI Interpretation
- Feb, 16 Double Top Entry
- Feb, 11 Observations on Retracement
- Feb, 10 USDJPY: Multiple Time Frame Analysis
- Feb, 08 Using Fibs in the Direction of the Daily Trend
- Feb, 04 RSI Failure Swings
- Feb, 03 RSI: Overbought/Oversold
- Jan, 28 Identifying Profit Targets on Double Tops and Bottoms
- Jan, 27 Using the Daily Trend to Enter a Trade
- Jan, 26 Guideline for Chart Time Frames
- Jan, 26 Lagging Indicators
- Jan, 14 Trading Double Tops/Double Bottoms
- Jan, 12 Trading the Doji
- Jan, 11 Going Long at Support
Student's Comments:
20 day crossed the 50 day, 20 day crossed the 200 day ,candlestick patterns showed a bearish engulfing pattern, enter at following candle at 132.54 -set stop at 132.21 - exit at 131.54
Next chart shows 200 day crossing 50 day with a double top. enter at 133.64 - stop at 135.05 - exit at 132.65
Instructor's Response:
You definitely have the right idea on interpreting moving averages. As the faster Moving Averages cross the slower Moving Averages, a trade can be taken in the direction of the cross.
Regarding the trades you mention, however, I want to call attention to two things...
On the first trade you mention that the trade is short with an entry at 132.54 and a stop at 132.21. When selling a pair the stop would need to go above the entry price as opposed to below it.
On the second trade the Risk Reward Ratio that is employed is negative...the risk is greater than the potential reward. The risk on the trade would be 141 pips while the gain would be 99 pips. Over time negative risk reward ratios will not work in favor of the trader and we would not recommend them as they will slowly erode the size of your account.
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