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Monday, June 9, 2014

Using ‘On-Stop’ Orders to Maximize Trading Profits



Examples of effective use of ‘on-stop’ trade entry orders

Using stop entries to enter the market in-line with fresh market momentum is an excellent way to take advantage of this entry type. The idea here is, after a surge of momentum opposite to a recent trend, a stop entry on a price action signal can help “confirm” that the fresh momentum will continue at least for a while after filling your entry order.
In the chart image below, we see a EURUSD pin bar sell signal that formed shortly after a down move in the market that followed a strong up trend. The most logical entry order on this pin bar sell signal was a sell stop, because this gives us some more “confirmation” (not 100%) that more bearish momentum might be in store. In this case, the pin bar signal actually kicked off a very large move lower and formed very early in the new downtrend.
Using on-stop entry orders can help get you into new trends early. By taking you into the market in-line with the near-term momentum, you get a little extra “confirmation” that the move you are entering on is more than just a temporary counter-trend retrace:
pin bar stop entry The on-stop entry is the only entry type to use for an inside bar trading strategy. An inside setup is a ‘breakout’ play by definition, so you need to enter in-line with momentum by waiting for price to break either above or below the mother bar high or low.
In the chart image below, we can see an inside bar setup in the AUDUSD . Note that using the sell-stop entry allowed us to have a little extra “confirmation” that the downtrend might continue by bringing us into the trade as bearish momentum pushed price down into our stop entry which would be placed just (typically 1 pip below) below the mother bar low of the inside bar setup:
inside bar stop entry The recent sell-off in the spot Gold market has been widely discussed on our site and if you knew how to use sell-stop entry orders properly you did not have to waste time waiting for the big moves to trigger. You could have simply placed a sell stop entry order below the lows of two recent price action sell signals on the daily spot Gold chart and then literally walked away, and you would still (at the time of this writing) be up a very large profit. This truly shows the power of using on-stop entry orders in trending markets.
In the chart image below, we can see two recent price action sell signals in the Gold market that you could have entered on sell-stop orders. The first one was a fakey sell signal that formed back on May 3rd, note how the market consolidated and ‘chopped’ sideways for four days after the signal formed. If you had placed a sell stop just below the fakey’s mother bar low, you would not have gotten filled until price finally broke lower, triggering the fakey sell entry on May 10th. Had you entered “at market” or on a limit retrace entry before price broke the mother bar low, you would have had to endure 4 days of price chopping sideways, including one big up day against your position. Many traders struggle with the emotions that get stirred up when they enter a trade early like this and have to wait for it to come off, and they end up closing trades out prematurely for no real reason as a result, then the trade comes off without then on board; this can mostly be avoided by using on-stop entry orders as we see below:
gold sell stop Note: On the three examples above, whilst they are all sell-stop entries, buy-stop entries work just as well and everything above applies for buy-stop entries too.

How to place an ‘on-stop’ entry order…

What good is knowing the advantages of on-stop entry orders if you don’t know HOW to place them?
Let’s do a quick walk-through of how to place pending on-stop entry orders on the Meta Trader 4 trading platform:
Step 1. There are three easy ways to open the order entry screen in MT4. The first one is to simply right click on the chart of the market you want to trade and then slide your mouse over “trading” and then “new order”, click on it and then you should see this box appear:
MT4 order window An even easier way to make the order window appear is to simply push the ‘F9’ button on your computer when you have the MT4 platform open, doing so will also open up the above order entry window.
The third way to get the order entry window open is to go to “Tools” at the top of the platform and then select “new order”. These are the three main ways to open up the order entry window in MT4.
Step 2. The next step is to select “Pending Order” from the order “Type” drop down menu. Then, you will select Buy Stop or Sell Stop, depending of course on which direction you are trading (Buy Stop for buy entry, Sell Stop for sell entry).
how to enter a pending stop entry Step 3. Next, you need to select the price you want to enter the market at and the expiry date of the entry order; the expiry date means if the market hasn’t filled your order by that date, the order will automatically be cancelled. You also need to decide the volume you will trade (lot size) and put in your stop loss level and profit target, for more on this, checkout this article on how to place stop losses and targets.
order entry window After you place your stop entry order you can see it in the “Terminal” window at the bottom of the MT4 platform. Be sure to either set an “expiry” as explained above, or cancel your pending stop entry order if it doesn’t get filled by the day you want. Forgetting about a pending order with no expiry can cause you to enter the market when you aren’t expecting to or don’t want to, this obviously can result in an unplanned loss.

In closing

Finally, I trust that you’ve learned some of the advantages of using ‘on-stop’ entry orders and some new concepts about the MT4 trading platform in today’s lesson. All of the ‘order-strategies’ discussed above are possible on our preferred forex broker’s trading platform. This powerful yet simple technology is something that you should take advantage of and hopefully after reading today’s lesson you have a better idea of how to do that.
If it’s not already clear, you can save time, learn to trade with discipline and take advantage of trading in-line with the current market momentum all just by knowing how to use ‘on-stop’ entry orders. For more information on how to trade my price action strategies, including using ‘on-stop’ entry orders and other order types,

Success in Forex = Learning + Practicing + Update Knowledge

1 comment:

Anas Ahmed said...

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