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Using A Technical Indicator To Stay In A Slow Move

FTSE EMA 21 March 2018

Often the hardest part of a trade is staying in the trade once it is going, especially when the move is slow and even more so, if the expectation is for a faster move. This situation can occur after a piece of news, or a break of a significant level, where the first move is quick, followed by a slower continuation. During this continuation, order flow characteristics aren’t as strong, so it becomes easy to doubt the move continuing.

A technical indicator can help by providing a trailing stop, allowing the continuation part of the move to be maximised. By using an exponential moving average on a short-term chart, a stop can be trailed tight to the action but still requiring a reference point to be broken before the trade can be exited, thereby alleviating the risk of getting spooked out by price action that is not indicative of a turn around.

This live AXIA daily debrief analyses an inside week break on the FTSE and how a 20 period EMA can be used to maintain a position even when the fall is not as fast as expected and also discusses when such a strategy loses validity.

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