Alright we have seen how some add ons such as the rejection rule can improve the 55-20 trade. We are going to introduce another technique, that is the Last Bar.
This Last Bar technique is very simple, and it is also based on the instant gratification rule. Ok first what is a last bar? A Last Bar is defined as the last bar that has some of the bar prior to breakout; or the last bar that has any part below the breakout level.
So how to use the last bar? This technique is a technique that can help you increase profitability. Move the stop loss to the bottom of the last bar whenever this senario arises, instead of having a stop at the 20day line. This way, your stop loss is less and you can hold a larger initial position based on our risk management basics. The Last Bar increases the profits, yet cuts the risk.
So there are a couple of exit/stop loss rules with the 55-20, which order do we follow, where do we place our stop loss or exit? Right, the order goes like this, follow the Rejection Rule first, Last Bar second, then the 20 day low.
Hope with this you will gain more confidence in trading. We have ended the technical analysis portion of our techniques, next we will look at trend analysis to further boast our profitability.