The EUR/USD pair broke out from congestion to the downside, passing through through a level established under the modified trading rules that I'll be implementing fully next week.
The congestion began in early June, with levels of US$1.4696 and US$1.3837. Using the 0.236 extension, the breakout levels are US$1.4899 and US$1.3634. The trailing stop/loss is initially set at US$0.0203 from the entry mark.
After the breakout the price went into retracement.
Under the rules I'm considering, I delay entry until the price has retraced to a Fibonacci level of 38.2% or more.
On the EUR/USD chart, Fibonacci 38.2% is US$1.3956, Fib 50% is US$1.4097 and Fib 61.8% is US$1.4238.
The retracement rules are a bit problematic. I've been testing them on currency trades using an hour chart. I've seen two strategies that work.
One is to indeed wait for the retracement and then get back in, but there's a lot of ambiguity there: Will the price halt at 38.2% or go further? There's no way to tell.
The other method that has worked is to set a conditional entry order at 1 pip (or 1¢ for stocks) beyond the breakout level, and then immediately set a stop/loss.
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