4/5: Manage the pending order while you wait for your trade

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.

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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.

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.

Modify your pending order in MT4 Show instruction

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.

Close your pending order in MT4 Show instruction

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

Always use the tip of the last down fractal for your 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.

Set stop loss on M5

sl1 First stop loss at the tip of the original down fractal
sl2 New stop loss at the tip of the newly formed down fractal
el3 Current entry point
tp4 Current profit target

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

Always use the high of the last up fractal for your pending buy stop level.

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.

Set entry line on M5

el1 First entry point at original up fractal
el2 New entry point at the high of the price under the new up fractal
sl3 Current stop loss
tp4 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:

Buy order executed

el1 Last up fractal — pending buy stop entry level
sl2 Stop loss at the tip of the last down fractal
number_3 The buy order is executed when price crosses the pending entry level
tp4 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:

Pivot points change at midnight
number_1 Previous pivot point where target would have been
number_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:

Lesson
Stay on top of your trade! To reduce your risk, adjust the stop loss in the direction of the trade.
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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.

Close your pending order in MT4 Show instruction

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

Always use the tip of the last up fractal for your 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.

Stop loss moves market down

sl1 First stop loss at the tip of the original up fractal
sl2 New stop loss at the tip of the newly formed up fractal
es3 Current entry point
tp4 Current profit target

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

Always use the low of the last down fractal for your pending sell stop level.

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:

Entry moved market down

es1 First entry point at the low price of original down fractal
es2 New entry point at the low price under the new down fractal
sl3 Current stop loss
tp4 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:

Sell order executed

es1 Last down fractal — pending sell stop entry level
sl2 Stop loss at the tip of the last up fractal
number_3 The sell order is executed when price crosses the pending entry level
tp4 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:

Pivot points change at midnight down
number_1 Previous pivot point where target would have been
number_2 New pivot point down - this is where you would need to adjust your profit target to.

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  • Hi,
    Just wondering why the tips of the fractals are used for a marker. Doesn't the position they point to change depending on the scale of the charts?
    It would be ok if the fractals also changed relatively but they seem to remain fixed.
    So i'm guessing this is a very rough estimate?
  • Hi donroops

    You are correct. So why would we put an imprecise placement for a stop loss?

    Lets consider the optimal point to put a stop loss. Ignoring the bid/ask price difference on MT4 for now, you would want to put the most optimal place above the highest price at which the buyers were wiling to buy at, and the lowest place the sellers were willing to sell at.

    Now, this would generally be just fractionally above the swing high or below the swing low. If the buyers were willing to buy higher than the high of that price then you are wrong in your decision - no problem, you get stopped out and you live to see another day.

    The same with the swing low, if you put your stop loss below the swing low and then you get stopped out, the it seems like the sellers were willing to sell below that low after all.

    So ideally, we would actually put the stop losses just above or below thee levels. But what happens, more often than not, is that the markets come and just take us out at our stop loss and shoot in the original direction of your trade. I don't know if you have experienced that yet, believe me its frustrating beyond hell!

    So the idea of putting the stop loss on the fractal tip is the it gives us a little extra breathing room - it will not prevent you being stopped out like that, but it lowers the chance. it also goes some way to incorporating the fact that the MT4 chart only shows gthe bid price and so when you are buying, you need to adjust any orders because the ask price will generally be higher.

    So even though the tip of the fractal may be in different when you zoom in and out, you do not need to worry about taking this into account because the idea is just to give you a little bit of breathing room on your stop loss, above or below the high and low.

    So why the tip of the fractal?

    Well, because as beginners it is difficult to be disciplined. You find yourself asking questions like "well, what's the harm in putting my stop loss just a teeny weeny bit higher?" And then before you know it, you are putting your stop loss 5- 10 pips higher than you should be. So the fractal tip gives you some discipline to make sure that you are just giving you self enough breathing room for the price, but that you don't have to make a judgement on how much breathing room.
  • Hi,

    I see the logic in moving the ehtry point and stop loss as new fractals appear, buy I have a question.

    Do you also move the trigger point for placing your pending trade if a new fractal appears pointing in the same direction?

    I hope that I have explained this well enough.
  • Hi Vinnieirl!

    I am not sure if I understand.

    What do you mean by "trigger point"?
  • Hi Fiskantes,

    I will try to explain.

    I mean the point at which you initially identify a trading opportunity and then move onto entering the pending order.

    It is when you are waiting for the price to pull back to fractal that indicated a possible trading opportunity, what if another fractal appears in the same direction as this one but before the price breaks through at the level of the initial fractal.

    Do you then use the new fractal as the point at which the price must pull back to before entering your pending order?

    Sorry if this is not clear but I am having trouble explaining what I mean.
  • Hi Vinnieirl,

    Yes, if another fractal appears in the same direction before the price crossed the previous one, you always take into consideration the last confirmed fractal. I have even prepared a graphical explanation, but unfortunately images are not working properly. smile

    Show spoiler
  • If a new fractal appears causing us to change the entry price and then a pivot line that was previously too close to use as a profit target is now more than 5 pips away should we change the profit target?
  • Thanks MBranjo.

    Thats exactly what I wanted to know.

    Appreciate your time explaining this.

    Cheers.
  • MBranjo:
    Hi Vinnieirl,

    Yes, if another fractal appears in the same direction before the price crossed the previous one, you always take into consideration the last confirmed fractal. I have even prepared a graphical explanation, but unfortunately images are not working properly. smile

    Show spoiler

    Hi MBranjo

    I'm wondering why the stop loss is placed at the second to last down fractal and not the one that was broken. It says above to "Always use the tip of the last down fractal for your stop loss." When would you move the stop loss to the last down fractal?
  • Hi guys,

    Vinnieirl: You´re welcome happy I enjoy helping out other members of our community. If you have more questions, keep asking.

    bencoy: Man, you´re right! Again. smile Good observation, I don´t know why I ignored the last down-fractal (I´m obv overworked but don´t tell to anyone :p), but thank you. I have edited both my and your post - so the links should now direct us to the correct picture.
  • Hi,
    New here..great site.
    Just wondering why you use the term "fractals" instead of "lower lows" and "lower highs", etc... Took me like 30 minutes to understand. But again maybe there is something I am missing.
    Thanks
  • Hey pin12345,

    Fractals are the indicators above the candles (small arrows).

    Hope this helps
  • MBranjo:
    bencoy: Man, you´re right! Again. smile Good observation, I don´t know why I ignored the last down-fractal (I´m obv overworked but don´t tell to anyone :p), but thank you. I have edited both my and your post - so the links should now direct us to the correct picture.
    Hello ,

    Shouldn't be the same for the pending price? as there is a new validated up fractal?

    Thanks,
  • Hi PoPoVitch,

    Yes, according to the Beginner strategy, if a new up fractal forms, then you move your entry point to the high of the price underneath the new up fractal. smile I´m better going to re-upload pictures, I just need to find a good situation to explain it more clearly.

    Thanks. wink
  • In MT4, the modify button is disabled if the market price is less than 10 pips away from the entry price. This doesn't really make sense, since nothing prevents you from deleting the order and placing a new one. I am confused. (Using demo account with Forex.)
  • Hi YohanN7,

    in this case I suggest to contact broker´s support for further help. Please let us know, if they helped you smile
  • Hi,
    I placed a horizontal line on the chart. how do I move/delete the line?
    Thanks.
  • Hi JHTAN,

    Just double click on the line and press delete or the right mouse button -> "Delete".

    Try it and tell us if you managed to do it, if not I will upload some pics later so it will be easier for you. smile
  • Hi,

    I can't clearly understand when I should move my stop loss.

    1. If new fractal is formed and confirmed, I always move my stop loss.
    2. I move my stop loss to the new formed and confirmed fractal ONLY if the new stop loss will improve my risk to reward ratio.

    The answer applies both to selling and buying I guess.

    Thanks!
  • nvelev:
    1. If new fractal is formed and confirmed, I always move my stop loss.
    2. I move my stop loss to the new formed and confirmed fractal ONLY if the new stop loss will improve my risk to reward ratio.

    Thanks!

    Hey nvelev,

    The stop loss in the beginner strategy always goes underneath the last confirmed fractal unless you are in the trade already. when in a trade we never increase the risk therefor while managing the pending order you can adjust the stop loss to the new fractal when it is confirmed but when in an active trade you should never adjust your stop loss in a way that increases risk. So when in an active trade we only move the stop loss in the same direction as the trade.

    i hope this answer helped if not do not hesitate to ask more questions!

    Ps.
    I see you are a new poster to the site, awesome!, welcome at tradimo!
    I hope you enjoy the content we offer here , maybe you could introduce yourself.
    The reason i ask is because i am always interested in how people got into trading smile and on top of my interest it is beneficial for the community and your learning experience when people get to know each other.

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