Rule #1: A trendline is drawn connecting a minimum of two previous lower highs, LHs (or peaks) Rule#2: At the CLOSE of the candle that comes: (a) very close to or (b) touches or (c) intersects the trendline but must not close significantly above it, A sell stop order is placed just a few pips (2-5pips depends on spread) under the low of the candle. Rule#3: Place Stop Loss just above the peak near the short trade entry area. Usually, the stop loss placement is above the high of the candlestick that you placed your pending order. You can place your stop loss at a distance of 5 pips above the high or if you think this is too close, you can increase the stop loss size to 10-15pips depending on your risk tolerance level. Rule#4: Set the profit target within previous significant low (or trough). Switch between different timeframes to identify suitable troughs for placing profit target if you can’t find anything in the timeframe that you are entering in.
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