Yesterday’s action after my 9:30 time-line (yellow line) illustrates one tactical approach to using the Knock that I’ve alluded to before . . that is, waiting for a cross of the EUR Trak channel mean before initiating a trade. This bump and reject of the mean is a common occurrence and can produce some anxiety, especially later in the day when price tends to meander off the EUR Trak into unknown territory.
An example of that tendency is the price action at 13:45 following the FED announcement when things took a bullish turn and the price kissed the EUR Trak good-bye. Things could have easily gone the other way, which is why it’s always smart to have a stop loss in place . . the problem with FX dynamics is, of course, that prices often blow through stops like a hot knife through butter, so more risk adverse traders are best served by standing back ahead of big news announcements and waiting for the trend to be clear before boarding the train. Just to be clear, the price action from 3:00 to 8:30 defines the EUR Trak channel and the subsequent price action falls under the tactics of the Knock.
I have previously termed the 3:00 – 8:30 action as the Dipper, with it’s own set of entry and stop loss rules and today’s Dipper was a whopper with a 105 pip return after being closed by the 15 pip trailing stop.
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