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Step 4: Manage the pending order

In the previous step you have learned how to place your pending order. Now it is time to monitor it and make adjustments based on changing market conditions.

New fractals may form, changing the stop loss or the entry price, and so you will need to adjust your pending order accordingly.

Go to either of the following instructions, depending on whether you have a pending buy stop order or a pending sell stop order.

  • Pending buy stop order
  • Pending sell stop order
Remember: Two candles must close after a fractal for it to be valid. Therefore, do not move your stop loss or entry level unless a fractal has been confirmed as valid.

Managing the pending buy stop order

If you have found that the market direction is up, you would have entered a pending buy stop order in the previous step. Different things can happen now that require you to adjust the pending order. In the following, you will learn what to do in each case.

A. If the market direction reverses, cancel the pending order

While managing your pending order, it is essential that you continue checking the 30 minute chart for any changes in the market direction. If the market direction changes in the opposite direction to what you determined in the first step, you should close the pending order and go back to step one.

Visit the first step of the beginner strategy if you have forgotten how to determine the market direction on the 30 minute chart.

B. If a new down fractal appears, change the stop loss

If a new down fractal forms you will need to adjust your stop loss. The new down fractals can appear above or below the current fractal — the rule is that you always use the last down fractal to place your stop loss.

The red lines in the following chart show the pending stop loss being moved.

 

  1. First stop loss at the tip of the original down fractal
  2. New stop loss at the tip of the newly formed down fractal
  3. Current entry point
  4. Current profit target

C. If a new up fractal appears, change the entry price

If a new up fractal forms, then you move your entry point to the high of the price underneath the new up fractal. The new up fractal may be higher or lower than your current fractal — the rule is that you always use the last up fractal for your pending entry.

The blue lines in the following chart show the pending entry being moved.

  1. First entry point at original up fractal
  2. New entry point at the high of the price under the new up fractal
  3. Current stop loss
  4. Current profit target

You should note, however, that if you change your pending order and this results in your entry being less than five pips away from your profit target, then you also change your profit target to the next pivot point up that is more than 5 pips away from your entry. This ensures that you incorporate the spread into your target and that you maintain a reasonable risk to reward ratio.

D. If the entry price is reached, the pending order turns into a trade

If the entry price of your pending entry is reached by the market, the pending order will automatically turn into a trade. This can be seen below:

 

  1. Last up fractal — pending buy stop entry level
  2. Stop loss at the tip of the last down fractal
  3. The buy order is executed when price crosses the pending entry level
  4. Current profit target

E. The pivot points change at midnight

At midnight, the pivot points change. The new day will have a new set of pivot points based on the now previous day's data. In this event you will have to adjust your profit target to the next new pivot point up.

The following chart shows what the change looks like:

 

  1. Previous pivot point where target would have been
  2. New pivot point up - this is where you would need to adjust your profit target to.

Next step

You now have an active trade and are ready to move to next step of the strategy, see next lesson.

Managing the pending sell stop order

If you have found that the market direction is down, you would have entered a pending sell stop order in the previous step. Different things can happen now that require you to adjust the pending order. In the following, you will learn what to do in each case.

A. If the market direction reverses, cancel the pending order

While managing your pending order, it is essential that you continue checking the 30 minute chart for any changes in the market direction. If the market direction changes in the opposite direction to the market direction you determined in the first step, you should close the pending order and go back to step one.

Visit the first step of the beginner strategy if you have forgotten how to determine the market direction on the 30 minute chart.

B. If a new up fractal appears, change the stop loss

If a new up fractal forms you will need to adjust your stop loss. The new fractal can form above or below the current fractal — the rule is that you always use the last up pointing fractal to place your stop loss.

The red lines in the following chart show the pending stop loss being moved.

 

First stop loss at the tip of the original up fractal

New stop loss at the tip of the newly formed up fractal

Current entry point

Current profit target

C. If a new down fractal appears, change the entry price

If a new down fractal forms, then you move your entry point to the low of the price above the new down pointing fractal. This is the new line that the price needs to cross in order for you to enter the trade. The new down fractal can appear above or below the current fractal — the rule is that you always use the last down fractal for the entry.

You should note, however, that if you change your pending order and this results in your entry being less than five pips away from your profit target, then you also change your profit target to the next pivot point down that is more than 5 pips away from your entry. This ensures that you incorporate the spread into your target and that you maintain a reasonable risk to reward ratio.

The orange lines in the following chart show the pending sell order being moved. Consider the following chart:

 

  1. First entry point at the low price of original down fractal
  2. New entry point at the low price under the new down fractal
  3. Current stop loss
  4. Current profit target

D. If the entry price is reached, the pending order turns into a trade

If the entry price of your pending entry is reached by the market, the pending order will automatically turn into a trade. This can be seen below:

  1. Last down fractal — pending sell stop entry level
  2. Stop loss at the tip of the last up fractal
  3. The sell order is executed when price crosses the pending entry level
  4. Current profit target

E. The pivot points change at midnight

At midnight, the pivot points change. The new day will have a new set of pivot points based on the now previous day's data. In this event you will have to adjust your profit target to the next new pivot point down.

The following chart shows what the change looks like:

  1. Previous pivot point where target would have been
  2. New pivot point down - this is where you would need to adjust your profit target to.