T2W Trading Community

The market has started to develop a pullback with regard to the down-move (refer to Figure 6). It is an excellent opportunity to add on (scale in) one trading unit. When adding, the trader should add on fewer units than the number of initial entry units. The standard value is 33% to a maximum of 50% of the number of the total entry units.

Therefore, we enter a pre-arranged add on unit sell stop order at 5125 level. The same stop  loss (5129  level ) will be used, as that of the initial entry, targeting the same target n°1. 

Therefore, we will have two trading units initially entered and a third one, as an add on, a total of three units. Two are exiting at target n°1 level, and the third at target n° 2 level. The enormous potential of this trade requires more than an intra-day trading session, so we have decided to let the trade in overnight.

As anticipated, the next day, the market dropped farther (refer to Figure 7) with a huge gap of 55.5 Dax points. Not only did the market price reach our target n° 1, but it exceeded it. At the opening of next day, we were still in the trade, in spite of the pre-arranged buy stop at 5062 (target n° 1). Thus, we had to manually exit with two units, right at the opening bar (5032 level). We also moved the stop of the remaining trading unit to the break-even level. We note that the occurrence of a second gap, usually called the running gap, gives another dimension to the already consistent trade potential.

The 50% level of the latter gap represents the half potential of the entire trend. The opening bar of the next day (refer to Figure 7) has a huge down tail, representing two thirds of the body. It only signals a short break in the strong down market drop. It looks like the target n°2 has a great probability to be attained. This would be the moment to add on (scale in) another trading unit, because of the high probability trade outcome.