TheStrategyLab.com Price Action Trading Support Forum

Hi Mark,

Thanks for access to the WRB Chapters 1-3. Congratulations on the brilliant material in there. I can already see how come parts of WRB Tutorials can improve my trading. As mentioned before, I trade S/R Bounces from Daily Charts and my system is profitable. However, I would like to improve profitability by only changing the nature of my entries, specifically the sizes of the my Stop Loss Levels.

I am posting the following developing trade in an effort to see, in real time, how the WRB techniques can help me achieve such. I am hoping you can guide me on some approaches in that regard.

On the chart posted:
- Instrument is EURGBP Daily Chart
- Red Lines represent the SR Zone I previously calculated based on Daily and Weekly Charts. 0.8840 and 0.8670
- Arrow is the last candle on chart (April 22. 2010)
- Magenta Lines represented potential Entry and Stop Loss (which I will place at end of Day today).

Normally I would wait for a candle to to touch the S/R area as indicated and place my entry order that way (at End of Day), and the Stop Loss would be below the last candle that touches the S/R area. Because it is all done using Daily, then the Stop Loss is pretty large sometime. I would not mind going down to a 4hour chart or 2Hour, or even 1Hour Chart to try to reduce the Stop Loss.

Please advise and/or guide.

Cheers.

Jacques

Hi JacquesFx,

The following reply was sent awhile back on April 23rd via private message as a reply but I forgot to repost it here at the forum. Thus, the information below is a repost of a private message to ensure that the public viewers know the answer (advice) that was given.

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Thanks...the education material is just an efficient way of seeing supply/demand in comparison to other stuff in books or forum discussions. The only way to change the stop/loss size is if the entry signal price action shares one tick within a WRB Zone to qualify the entry as occurring within a WRB Zone.
First, the higher the time frame will tend (usually) produce a stop/loss too large or too big of a risk scenario. However, I would recommend using the same daily chart as your entry signal time frame to keep it simple.

With that said, if you feel the stop is too large...I recommend first to reduce your position size to better manage the increased risk. However, if you're trading via the minimum size (1 lot/contract/share), my second recommendation is to delay your entry to intentionally try to get a better entry price that's closer to where you would have your initial stop/loss protection.

Yet, the 3rd recommendation involves WRB Analysis. As stated in tutorial chapters version 2.2, a price action that enters a WRB Zone will convert (transform) a zone into support/resistance levels. Therefore, use the support level of the zone (your bottom red line) as your hard stop and the resistance level of the zone (your top red line) as the mental stop. Thus, if you're Long and if the price action drops to the resistance level (mental stop)...you determine at the point to exit the position early to minimize the loss or you stay in the trade knowing you still have your hard stop in place.

My point is that you don't want the hard stop all by itself to manage your trade regardless if the stop is big, normal or small. Instead, you want a trigger price (the top part of the zone that's below your entry) to be your mental stop and to tell you it's time to re-evaluate your trade position.

Best Regards,
M.A. Perry