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5 Trailing Stop Loss Techniques (Risk Management for Traders) - YouTube
Channel: Rayner Teo
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hey hey what's up my friend so in this
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video I'll share with you five
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techniques right that you can use to
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trail your stop-loss right so you can
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write massive trends in the market that
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goes on and on and on and on and on so
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keep watching okay so the first
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technique that I want to share with you
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is moving average right by now I think
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you should be familiar that moving
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average is something that you can use to
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trail your stop-loss alright so for
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example let's say you went long on the
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break of this highs over here market
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break up of this highs over here and you
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can trail your stop-loss using this
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moving average this is the 20-period
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moving average so you only exit that
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rate when the price breaks and closed
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below it okay so in this case you would
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exit your trip over here when the price
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breaks and close below the 20-period
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moving average the benefit of using
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moving average is it's versatile right
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if you want to capture a short-term
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trend you can use a 20-period moving
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average if you wanna capture a
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longer-term trend you can use something
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like the 200 period moving average so
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you can see that you can adjust the
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parameters to suit your own trading
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needs
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okay so the downside of moving average
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that I'll be honest with you is that
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sometimes right you're not able to trill
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your stop-loss using the moving average
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to say for example the market here
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retraced slower and then it kept this
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bullish close over here and you want to
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go long at this point in time you kind
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of realize that the moving average is
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actually above the price right you can
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trail your stop-loss in this case
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because the moving average is above the
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price that you want to go along okay so
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this is one of the downside of moving
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average is that sometimes if the Poobah
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is too deep right and the moving average
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that you use is too short term like the
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20 M II it's not possible to be trilling
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with the moving average okay in this
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case you might have to use a longer term
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moving average like a 50 ma or 100 MA
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alright so this is the first technique
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that I want to share with you using
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moving average to trill your stop-loss
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the second technique is a market
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structure right so for those of you who
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are price action traders you can use the
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structure of the markets to trail your
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stop-loss here's an example so you can
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see over here let's say for example
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again you long the breakout over here
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market hits higher retrace right this is
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the swing low which can reference to set
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your stop loss alright so your stop-loss
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go below the swing low market bricks a
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new high makes a new swing load this
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swing low you can reference your
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stop-loss market makes a new high
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retraces makes a new swing low you can
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reference it as your stop-loss market
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makes a new swing high then he retraced
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us right and finally over here it breaks
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and close below dear
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swing low over here where you exit the
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tree so the benefit right of using
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market structure to curl your stop-loss
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instead you are pretty much reading the
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price action of the markets right and
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exiting your trades based on the price
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section so this means right that you can
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actually no better time your exits right
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while reading the price section of the
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monkeys because indicators like moving
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average right they tend to let whereas
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price section right it's a more it uh it
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doesn't lack as much compared to moving
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average or other indicator so price
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section is something that you can
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consider using right to trail your
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stop-loss however the downside to price
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action is sometimes right the market may
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form a very deep pullback of right and
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then finally if we trace at this point
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in time right you realize that hey you
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know you may give back a lot of open
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profits or sometimes it may even retrace
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so deep right where you end up giving
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back all of your open profits right
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because if you were to wait for price
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action right or rather you were to use
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market structure you wait for it to make
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a new swing low and sometimes the market
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can keep going down low and low and
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lower before finally makes a new swing
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low and by the time right your profits
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are evaporated or you may even end up
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with you know losing on the trade right
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so this is the downside off of market
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structure okay and the technique on a
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share with you is percentage change this
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is very straight forward right very
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useful for stock traders all right so
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this chat Alibaba you can see that it
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made a high of a hundred and ten dollars
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so what you can do is that you can just
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use a percentage change to trailer
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stop-loss so hundred and ten right so if
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the price drops ten percent you'll exit
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the trade so very simply put right ten
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percent of hundred and ten is pretty
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much eleven dollars so if the price goes
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to 109 in this case over here it drops
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to sorry I beg your pardon right
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horrible method right the price drops
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right to below ninety nine right goes
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under in ten minus 11 is ninety nine
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right you will exit the trade so in this
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case over here the price break and close
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below the 99
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level and you'll exit the trade so this
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is one way you can use a percentage
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changes or two trillion stop-loss the
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downside to this approach is that if
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you're trading FX markets right where
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you get price point like one point zero
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one five two right it's pretty damn
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difficult to calculate ten percent based
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on this four decimal places right so
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obviously this is more up for more
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suitable for stock markets right maybe
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even crypto currencies like Bitcoin
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where the numbers are larger and easier
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to to make and reference from it okay
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the fourth technique I want to share
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with you is Average True Range right a
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very powerful way to trail your
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stop-loss as well
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how it works is that okay so this ignore
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this indicator for a while alright so by
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right right you know what the ATR
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indicator is it's a measurement of
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volatility in the market so if you pull
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out your ATR indicator it will give you
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a value so let's say for example the ATR
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indicator currently shows you let's say
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a hundred pips right this is for euro
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dollar
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okay so hundred pips right let's say for
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example you along one euro dollar and
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you're trailing with this five eighty
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our example so what you'll do is that
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the mock the indicator right you will
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take the highest price over here right
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and - off 580 are so current eighty
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eight hundred people so five ATR is five
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hundred pips so this is where you pretty
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much right get this green line over here
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it's pretty much five ATR away from this
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heist so this indicator here is called
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the chandelier stop it's a variation of
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the average True Range indicator right
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by this more morva using it as a
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trailing stop loss approach right you
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can use this a chandelier stop which
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takes into account the average true
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range of the markets to set your
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trailing stop loss alright so again this
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is like moving average it is versatile
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you can change this to three ATR 6 ATR
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10 in here depending on the type of
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trends then you want to capture my this
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is the core idea the core concept behind
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how this indicator moves right is pretty
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much based on the average True Range
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approach right the downside to this is
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similar to the moving average is that
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let's say for example right you want to
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say shot how about you want to short
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let's say over here right the market has
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been steadily declining lower and for
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whatever reason you decide to go shot
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right at this point in time ready this
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indicator is actually at the lower end
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right which is meant for traders who are
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long to trail their stop loss right
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you can see that the line is not above
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it right I believe we can make some
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adjustment and change this line to the
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top right where it's being calculated
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from the lows instead right right yes
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this line over here is completed now
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from the highest that's why this line is
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being shown right you may have to tweak
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it and tell this indicator to now drill
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it from this low instead so the line
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will be above it and you casually trill
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your stop-loss on based on this short
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treat then you can you hypothetically
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wanted to tree okay so this is a another
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downside of the average true range or
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dish and the little stop indicator and
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lastly right you can use the previous
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candle high-low to trill your stop-loss
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right so let me share with you an
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example so if you recall right Bitcoin
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it has been moving pretty strongly over
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the last ANSI 2017 right you can see
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that the market when parabolic over here
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the range of the candles got larger and
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larger right so where you could have
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trailer stop-loss is that if the price
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right breaks and closed below the
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previous stay low
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you'll exit the trade which is as you
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can see is on this candle over here
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let's you know zoom in a little bit
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right you can see this candle break and
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close below this previous candle look
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right so this is where you exit the
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trade so the the beauty right of using
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this approach is that when the market
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goes parabolic okay and you trailer stop
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loss using a previous candle high or low
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approach right you can actually save or
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rather protect a huge amount of open
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profits in this case you pretty much
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exit near this out say 16,000 to 300
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level right and in Bitcoin as you know
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at this point in time of this video is
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currently trading around the 7000 level
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alright so you can see that you pretty
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much exit near the highs right if you
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were to follow this a previous candle
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high-low approach right high / low
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approach this is very useful if the
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market called parabolic right how do you
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know if the price is parabolic just look
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at the range of the candles is getting
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larger and larger and in terms of the
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direction right it's like 1 o'clock if
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you look at the clock right the one
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o'clock Direction is like
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steeper than the one o'clock direction
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with the range of the candles getting
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larger and larger this is a huge clue to
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you that the market has gone parabolic
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and you might want to consider
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trilling and stop-loss using a previous
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candle high / low approach in this case
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since you're long gone you drill it
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based on a previous candle low approach
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so the downside to this approach right
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of course are is that you might get
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stopped out of your trade way too early
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especially if the market is in a healthy
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trend where there is no obvious app and
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flow in the market like the market goes
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up higher pulls back goes up higher
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pulls back goes up higher in this case
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right if you were to trail your
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stop-loss right based on the previous
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candle low you realize that you are
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pretty much getting stopped up too early
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right so you want to read the price
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action context and then you know to
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decide whether this approach would suit
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you best
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okay so it's a quick recap right the
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first technique I share with you is to
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use moving average to trailer stop-loss
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right then you or you can use the market
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structure right referencing from the
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swing high and swing low to trill your
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stop-loss
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you can use percentage change as well
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right if the price drops X percent you
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exit the trade you can use the Average
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True Range right / and the little stop
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right to trailer stop-loss which is
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actually based on volatility of the
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market and last but not least you can
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drill it based on the previous candle
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high or low which is very useful right
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when the market has gone parabolic okay
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so I've come to the end of this video if
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you want to learn more right go down to
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my website trading with Rainer come over
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here at the top right and and if you
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wanna learn more right for example this
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video we focus a lot on exits and
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trailing stop loss you're gonna learn
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about entries right go ahead to my
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website trading with Rainer comm
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download this guide over here the
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ultimate guide to price action trading
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where you learn how to better time your
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entries and read the price section of
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the market so I just click this blue
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button and I'll send it to your email
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address for free okay so with that said
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I have come to the end of this video if
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any feedback comment let me know in the
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comment section below if you've enjoyed
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this video hit the like button subscribe
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to my youtube channel I would really
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appreciate it and I'll talk to you soon
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you
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