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Hi everyone,
I saw 2 consecutive big bull bars with one closing on its high (bar 1 and bar 2). I tried to enter above bar 2, but bar 3 went above bar 2 only in the last few seconds of bar 3 and ended up closing as a bear bar. I waited for more PA and bar 4 seemed like good follow through, so I entered above bar 4. I held through bar 5.
However, I noticed that there was price rejection around EMA and market formed a big bear bar 6. My initial stop was below bar 1, but I saw this big opposite move that I thought was uncharacteristic given the big bull bars and the recent PA. I thought there might be an opening reversal playing out.
So, I exited below bar 6.
1) Is this reasonable to do? Or, did I just move make my stop a skunk stop?
2) What are some other ways to manage this trade beyond scaling in?
3) When does it make sense to hold stop and when does it make sense to get out?
4) If you were to get out of this trade, where would you get out? If you would continue to hold, what are the reasons?
There is a lot of really good price action analysis here, and I just wanted to add my two cents about the bar 6 pullback.
Al suggests some things to look for in the BTC Video 15F about breakouts and pullbacks:
-Watch the pullback. If it looks like a tight Trading Range, it might fail.
-Look for: small bodies, prominent tails, and a lack of consecutive countertrend bars.
-And, computers need to see follow through after a big breakout because the market might be forming a trap. (Compare bars 6 and 7 to bars 12 and 13)
I think that part of what we're doing as aspiring traders is to learn to label parts of the price action so we can make logical decisions.
We also have to figure out ways to remember the things to look for when we are trading.
Hi
Thanks a lot ... Many people talk about trade management, but no one has ever answered this question! I also have exited many trades that were profitable. In such situations, how should trade management be handled?
It seems like your reasoning for exiting early was the "rejection near the ema." But bars 5 and 6 were still very clearly gapped below the ema. You got nervous about taking a full loss and took a skunk stop like you said. It happens.
One more thing I want to mention is you were trading against a strong trend. Which is fine when it makes sense, as it did here. But when you trade reversals, you have to be prepared to sit through a pull back especially coming after a gap like that. Rely on your stop!
