- The most difficult thing for financial trader isn’t placing an order, instead, is to exit.
- Investors have all heard this saying more or less, but how and why would make this the toughest to conquer?
- Let us imagine, presuming if we chose XAUUSD(Gold) to trade, the market price went as how the order(s) were placed, but allowing the position to flow along the market without presetting the Take-Profit/Stop-Loss options, nor monitoring the movement afterward. While the Investors were pleased with the floating result on making profit, all of sudden, the market sent a signal that contradicts to the trend and smashed XAUUSD to the ground. Due to lack of setting Take-Profit and missed in vain for grasping the opportunity to cash-out. Meanwhile, lack of placing Stop-Loss to drove self-entering the dilemma with unforeseeable opportunity to unwind. Hence, the importance of exercising the Take-Profit/Stop-Loss point can be seen from this example.
Demonstration of Not Setting Take-Profit/Stop-Loss
Mental Construction For Pre-Measurement
- Firstly we will have to understand few critical point on trading XAUUSD
- Understanding your own personality, whether an Aggressor Type or a Non-Aggressor Type. Non-Aggressors would prone to awaiting the market price to return then adopt Bargain-Hunt for the best possible interest. Aggressors would tend to operate with market price to grasp the instant flow of the trend. Once we figured out our own preference pattern, will recommend investors to remind own-selves to prevent constantly shifting the model for more reasonable and consistent order logic
- Take a glimpse over the current dominant trend for the market prior to place any order(s). When we turn on the Candlestick Chart for XAUUSD, it is recommended to observe the Weekly and Daily range to comprehend the rough outlook from interpreting the past. This would be in favor for us to mitigate the risk for hedging the main stream, yet, would make the process to smoothed out.
- Once we learned the recent market trend, then sequentially Scale-Down the Candlestick Chart to smaller interval (4Hrs, 1Hr and 15Mins). The purpose of this is to completely understand how the outlook reacts, which would assist us to judge the most suitable entry point and the measurement of Take-Profit/Stop-Loss points.
Preparation In Tools Prior Measurement
- As the old slang says, “A Good Tool Is Required To Master A Job”, Investors are recommended to learn and practice multiple different measurement and technical indicators, for the purpose of adopting the analysis on the software. What needs special attention is: It’s Recommended To Use A Few Indicators That You Are Proficient In. And The More You Utilize Doesn’t Represent It Would Be More Accurate, Vice Versa, By Using Only One Method Would Not Provide You With Precise Result With The Whole View. Moreover, the technical analysis realm has developed more than a hundred types of technical indicator. The measurement results of some indicators will have inconsistent results, which will increase the difficulty to Investors during the gauge.
- The following measurement samples on Morphological Measurements and Technical Indicators would be simplified for Investors for the purpose of guiding Investors to establish the essential concept on Take-Profit/Stop-Loss, hereafter to build your personal method on top of the foundation through self-studies.
Introduction Of Essential Measurement Tools
- The price of XAUUSD generally holds the tendency, which would never last forever, and eventually would alter its direction. However, the alteration are usually sectional, for example, easing on volatility over the initial pricing, then ushers the narrow band vacillation, and even barely moves until it eventually appear with the reversal. For different section would consecutively generates new forecast, and as these progressively alteration would lead the price for XAUUSD to form different layout for next section. However, throughout the long-term observations from the professional technical analyst, this type of price formation is often repetitive and mostly similar. This method has become one of the analysis to predict how the future development act afterward.
- The common Candlestick pattern, M-Shape/W-Shape/Head & Shoulders Bottom/Head & Shoulders Top (same measurement, details would be disregarded)
If we look back to the past, the previous M-Shape’s Neck is located at 1459(please refer to next page), the price mentioned could be the Support point for the current market price for Investors who holds the Short order(s) for the short-term. Hence, the Stop-Loss for Short order(s) could be set above 1459 to provide your holding position with security. In occurrence if the trend starts to turn around on the short-term layout, the longing momentum begins to build-up, and this previous nominated stop-loss point could become the short-term Resistance point for you, and Investors could consider to place your Take-Profit point under the resistance.
Demonstration For Resistance/Support Point & Neck On Candlestick Chart
W-shape’s Neck located on 1490, which could be the Support point for the short-term Long position. Stop-Loss for Long order(s) would be recommended to set under it with tolerance as personal discretion. Accompany with the surges eased afterward, Sellers starts to gather, 1490 would automatically shift from support to Resistance, but for Short order(s), and would suggest to place your Take-Profit point above the resistance point.
The Purpose of Morphological Measurement
- Example of simple measurement of take-profit and stop-loss points using candlestick patterns aforementioned were intended to instruct Investors to learn how to predict the future prospect of the trend from observing the previous result. As the last picture indicates, by marking the neck would provide you with the reference line for the next phase of the market. On the other prospective, the Morphological Analyst points out, the function of the Neck line is not only this, but also can be use as a guidance for Support & Resistance. According to the sample from the W-shape on last picture, the Neck converged with the candlestick could imply the market price may be initiating the next appreciation. If the candlestick up-crossed the Neck, the joint would immediately become the initial support reference for the short-term Longing momentum, and the post-entered Long order(s) could make Stop-Loss point under this support. Accompany with the up-nudges trend, the market would starts to seek for the potential point where the neck may be formed on the M-shape for Long orders’ Take-Profit Resistance point. Eventually, if the Sellers entered after the soaring momentum got eased, the current Neck for the W-shape would become the next Take-Profit spot for the previous Short order(s) hold, and vice versa to continue the circulation.
- This indicator could mark the reference transition point, yet provide Investors with the exit guidance.
- A Brief Instruction: SAR divided into two forms,
1st: Rising Lattice. SAR Dots located under the candlestick, depicted the Ascending trend
2nd: Sinking Lattice. SAR Dots located on top of the candlestick, depicted the Descending trend.
- Simple method of measurement, XAUUSD’s Pricing transferred from the descending lattice distribution around 1490(arrow on the left) to ascending lattice distribution. This marked the transition of the following price to flip from Bear to Bull, and the market would recognize the spot as the support point for short-term Long position, and would be placing the stop-loss under the support of 1490.
- To sum up, either using morphological measurement or technical indicator did resulted with common outcome. Therefore, either adopting whichever preferred method would definitely provide Investors with certain effect of assistance.
- Combining the pre-measured mental construction and the thorough understanding over the measurement tools, through repeating basic exercises to expand your sight over the macroeconomic. After the continuous practice, Investors could forget your skill to sail through any kinds of swell.
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