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38

BRITISH POUN

19B0B

1B50B

1B99B 1750B 17099 0 15999 1550B

Break J

15088 V 14499

etracenent

14989

Figure 2 shows the British Pound. There is a low, then a retracement followed by another retracement and then the market starts up. What is a convenient way to enter this market?



Obviously, it is only by looking back that I can see that prices are in an established trend. Thats what part of this chapter is about. I have LOOKED BACK, realized that prices are in an established trend, and now I want a piece of the action. I dont want to be left behind! Should I chase this rrsarket? Should I just jump in and hope that it wili keep going, or is there an intelligent way to enter?

Entry Technique for an Established Trend

Wisdom has shown that I should never chase a market or just jump in.

Heres the way I enter an established trend. Each day, I take a 4 day moving average of the Low (last 4 lows / 4) in an uptrend (LMA), or a 4 day moving average of the High (last 4 highs / 4) in a downtrend (HMA). I then offset that moving average forward 1 day ahead {see Part II of the Manual). This figure I call the Average Entry Point (AEP).

i then compute a Fibonacci retracement of the latest leg of the trend. This has to be done for every swing. I call this my Fibonacci Entry Point (FEP).

The calculation in a downtrend is;

PEP = Low + (High - Low) x .618 The calculation in an uptrend is:

FEP = High - (High - Low) x .618

Because I want to get into the action and go with the trend, I will have to monitor the market until I can optimize my entry, so I place a mental order at the .618 retracement. If prices do not retrace that far and start back in the direction of the trend, I then try to enter at a price that is between the FEP and the AEP. This technique automatically picks up .500 and .382 retracements.

If prices stall or move sideways, I can almost always get in at the AEP. The AEP is the last controlled point at which i will enter the market. I always try for the others first.

One more thing; if prices retrace and close beyond the FEP, I scratch the trade from my mind. Something is wrong and this market is behaving too erratically for me.

This technique works very well for me. It gets me into an established trend about 80% of the time. Those I miss I dont worry about.



SyiSS

7B19

77&2 7706

7649 7592

7535 7478

7421 7364 7387 7250

0=8516 PRą 74.21

Figure 3 I hadnt been paying much attention to the Swiss Franc, having been busy with other things. Looking back at the September Swiss Franc, I realized that it had met my requirements for an established downtrend.

It had just broken out of a trading range after making a modest retracement, and when I noticed it, it was as shown in Figure 3. I could see that it had been in a steady downward trend since the middle of April. I was fiiled that day on the breakout of a trading range. Now, I wanted to add to my position because my fill had been very low -at the close of trading. I thought to myself, "If prices react here, Ill add another contract."



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