The first scenario considers a retracement of The second scenario will occur when the price experiences a retracement of The stop-loss will be placed at the origin of the previous impulsive movement. Prices extensions are movements that resume the progress of a previous trend. Generally, the extensions occur in the third wave, and the correction corresponding to the second wave does not move beyond the origin of the first impulsive movement.

The next figure exposes the extension of a regular three-wave pattern. Consider that the wave identification does not correspond to an Elliott wave labeling.

The analysis in a five-wave pattern is similar to the three-wave case. The difference in this pattern is the seek the length of an additional impulsive move. The five-wave pattern includes three impulsive movements and two corrective moves.

The following figure illustrates the Fibonacci measures of this formation. The Phi-Ellipse is a countertrend trading method based on the oscillation of price with time. Its goal is to reduce the noise of falses breakouts and increase the stability of the investment strategy.

The drawing process of a Phi-Ellipse requires to identify three points, as shown in the next figure. After identifying the points A, B, and C, in a regular three-wave pattern, there should place the Phi-Ellipse in these points.

We should expect a new impulsive move as the first impulse. There are three ways to trade against the trend at the end of the Phi-Ellipse, which are:. In this educational article, we discussed the elements that should contain a trading strategy. The application of a systematic trading strategy or a combination with a strategy across time in a diversified portfolio could help the investor reduce the risk in its investment decisions.

In this context, in this article, we presented the use of Fibonacci retracements and extensions to offer entry setups inlcuding its stop loss and profit target level. Finally, we introduced the Phi-Ellipse method, which allows the investor to reduce the risk of falses breakouts in its investment portfolio. In the next educational article, we will review the use of candlesticks formations, chart patterns, trend lines, and trend channels.

Save my name, email, and website in this browser for the next time I comment. About Us Advertise With Us Contact Us. Forex Academy. Home Forex Education Forex Daily Topic Principles of Trading Strategies. RELATED ARTICLES MORE FROM AUTHOR. Algorithmic Trading How to Perform A True Strategy Backtest. Have your own historical data. Constantly review the results of your work. Analysis and work on mistakes are among the most important components of successful trade. It is important to be self-critical in the analysis of loss positions.

Having dealt with loss positions , you can avoid repeating these mistakes. With the lack of experience it is better not to take the risk. In the process of price movement in a particular direction market starts jumping up or down. To learn how to use short — term fluctuations you must gain experience thus minimizing risks.

Trade only when you are confident about it. It is better to wait for the appropriate moment to enter the market, than open the order when you do not understand the situation. It is important to enter and leave the market at the right time.

If you do not feel confident, you better not take the risk. A couple of lost pips cannot be compared with the large loss, which may be caused by rash action. Just open the order later: the market is not going anywhere. Log in. Be a Step Ahead! To receive new articles instantly Subscribe to updates. LATEST TRADING ANALYSIS. Forex Broker Forex blog Forex Trading Principles × Be a step ahead!

Every trader has a unique set of strategies which they use to navigate the forex market. These strategies are designed with the hope that they will address the immediate needs of an individual trader. As a trader, the rules you create for yourself might not be useful to anyone else but you. For this reason, every trader must learn more about their own objectives in order to formulate rules that allow them to achieve their set goals.

There are also some rules that are common to the entire market and you can definitely borrow some inspiration from these general rules. Most of the principles that apply to the market as a whole are a reflection of the nature of forex trade. Here are some of the best rules and principles of trading on forex you should know about.

It is important to keep an account of what is happening in the market. The best way to do this is through an analysis of forex indicators. These indicators give a real perspective of the economic situation of the currency market.

Indicators help you identify the best times to enter and exit the market. This, in turn, saves you from losses and maximizes your profits. Personal daily, weekly and even hourly records are crucial in the forex business. These records not only keep an account of your successes but also of your mistakes. You can thus use them in future to develop better strategies and to identify possible problem areas. Personal records also allow you to identify particular patterns in the trade which can help you follow a certain trend or quit early enough.

Market signals provided by charts and indicators are the key to a successful trading. There are many kinds of signals that the market gives and indicators are the only way to understand them. Market signals in forex can provide a window to understanding support and resistance, volatility in the market and other vital signs that can protect your assets. Another key rule in the forex business is to always control emotions.

Emotions are bad in the forex business because the market is quite disappointing most times. If you are someone who reacts passionately when hit by disappointment thus, you can easily lose track and lose your money. In the forex trading business , you need to be always pragmatic and ready to follow the logic.

One of the best principles you will have in forex is deciding to work independently. You will be required to think independently, to analyze the market independently and to trade independently.

Forex is not like other businesses where you can utilize the power of collaboration in monitoring your assets. The dynamic nature of the business makes it impossible to work with teams. Another great rule you should have when trading is to ensure that your trades are always timed correctly. The difference between a profit-making move and a loss-making move is very small in the forex market.

This is why the business relies on a great deal of market data. Make sure that you have followed all the insights before venturing into any trade. The ultimate business move in most trading industries is to have trading limits. Limits are important for mitigating risks and securing a long for those involve in the trade. You should be able to establish your limits for every single trade you make. You should also have limits for the day, week and all other trading stages.

There are a number of common risk management tips you should always remember. First, you need to know that your funds are limited, so you need to invest sparingly. Secondly, you should be aware that even though success might come early , your established principles should always prevail.

Apart from these, it is advisable to always trade with the market and not against it. Risk management is all about lessening the effects of risks and not necessarily getting rid of risk. Every business has its own rules and principles which help traders achieve their goals.

By internalizing the above rules and principles of the forex market, you will definitely enjoy an easier time in the forex trade. Your email address will not be published. Save my name, email, and website in this browser for the next time I comment. Skip to content Like Us On Facebook. Follow the indicators It is important to keep an account of what is happening in the market. Have personal trading records Personal daily, weekly and even hourly records are crucial in the forex business. Do a thorough analysis of the signals Market signals provided by charts and indicators are the key to a successful trading.

Control your emotions Another key rule in the forex business is to always control emotions. Work independently One of the best principles you will have in forex is deciding to work independently. Make timely trades Another great rule you should have when trading is to ensure that your trades are always timed correctly.

Know your limits The ultimate business move in most trading industries is to have trading limits. Embrace risk management strategies There are a number of common risk management tips you should always remember. Founders Guide. The Founder's Guide Team - Asian Associates with dynamic elements out to make a change. Thank you for visiting our site! If you do have any questions or inquiry, feel free to contact us through our links and please don't forget to follow our social media accounts.

It would be our pleasure to help you in any way we can. Always Remember: "Proceed to Succeed". Hoping to hear from you soon! Leave a Reply Cancel reply Your email address will not be published.

Leave a Reply Cancel reply Your email address will not be published. To learn how to use short — term fluctuations you must gain experience thus minimizing risks. Work and think by yourself. Trade for your own gain after learning how to use a full set of techniques you can utilize for years to come. The facilitators instilled the proper mindset and placed a strong emphasis on capital management. It would therefore not be advisable to argue with the trend.

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