Executing the Trend Continuation Trade
Now that you have all of the pieces of the puzzle and understand how they fit together. We will now take a look at the trend continuation trade example from start to finish. All of the pieces of the puzzle now come together and help you execute this trade intelligently. Most of your skills will be needed before you even get into the trade so we will look at before, during, and after screenshots of the trade to better understand where everything goes.
Before You Enter the Trade
So let’s live through the trend continuation trade. You have understood from the market structure what type of trade you are expecting. You have decided at what location that type of trade would make sense. Now you see an entry trigger at that location so you can take action. All of those details have been covered in these lessons and now we just need to look at the process of preparing for the trade. What do you know? What can you do with that information?
In the above screenshot, this trade has not yet triggered but you know what your entry price will be. You also know what your stop loss price will be and so, therefore, you know your risk. In this example, the risk on the trade if you were to take it is 115 pips. When it comes to the take profit the next 2 obstacles in the trades path are obvious. Due to the nature of this type of trade you can expect the higher high, and the momentum behind that trade confirms that you could easily shoot for obstacle 2 if you wanted. For the sake of this example we will play it safe and shoot bang in the middle of obstacle’s 1 and 2. So now we know the reward on the trade which, in this example, is 260 pips. That gives you a risk:reward of 1:2¼ which is very acceptable.
Placing a Safety Net
You now have a trade that is setting up at a good location with good structure behind it. You have an entry trigger that has presented itself. The risk:reward makes the trade worth it. At the stage you see in the screenshot your stop loss price has more than one use. Since you have not yet entered the trade, if price came down and passed your stop loss location then your trade would be canceled. After all, your chosen location would be broken at that point. If price heads up however and triggers your entry price then the stop loss will be as the name suggests. There is also a safety net that can be decided upon at this juncture.
Obstacle 1 may not have been used as a take profit but it is still the home of 2 significant highs that create its resistance box. It would be a shame to have that area hold and the trade turn around and head to your stop loss. This makes it a great place to move your stop loss to +1 pip or higher. Here we call this a lock profit trigger, it has been marked in the above screenshot. This lock profit area is a great place for you to receive an email so that you can come to the chart and see ‘how’ price arrived at it. Based on how price has arrived you will be able to decide if you want to move your stop loss to +1 pip, move your stop loss to lock in more profit that just the +1, or even just take profit there.
After You Have Entered the Trade
Now that the trade has entered and price has made it to your lock profit trigger, you can asses how price arrived there. In the case of this trend continuation trade there was not much hesitation but on the way up you can clearly make out a pullback that started with that red candle. This ‘pullback and go’ is a great place to put your stop loss instead of just moving it to +1 pip. If price comes down and breaks that area then things may very well be shifting the wrong way.
Keeping in mind that you are already at +180 pips at this juncture, and you only risked 115 pips, if price had displayed a hard time getting there you would have the option to exit. With this trade though price made a nice direct run as it passes that first high, as long as it doesn’t get caught up before breaking this resistance box there is nothing to worry about. It should be clear sailing up to your decided take profit.
Trade Complete – Wait for the Next
In this next screenshot, price has made it to your take profit. A technically sound trade that was executed intelligently with maximum probability in your favor every step of the way. Even though this trade had a duration of 8-9 days, it could have been executed safely from start to finish with just a few minutes of your time using the WaveFX Trading Membership tools. These tools will execute, manage, and email you at the important decisive moments. These tools would have allowed you to plot out everything discussed in this lesson in minutes at the close of the daily candle, the decided entry trigger. In short, on your part, this trade would have taken you about 5 minutes of those 8-9 days to execute it.