Developing one’s own trading strategy: awaiting for the completion of the retracement (stage 3)

As I mentioned previously the best moment to open a position following the trend is to wait for the completion of a short term retracement against the prevailing trend. We have already considered how to determine the direction of the prevailing trend and consequently the direction of our transaction. We also know how to determine the beginning of a retracement. In this article I will tell you how to determine properly the end point of a retracement.

Stage 3. Determining the end point of the retracement

In our example either bear convergence of MACDA with the price on the four-hour chart or bear convergence of MACDA on the hourly chart will signal the end of the retracement. The signal form the four-hour chart of course will be stronger. But convergence on the hourly chart will be enough to fix the end point of the retracement (refer to Figure 1).