Levels to Look for Exits: Previous Daily Hi/Los, Fibs and Pivots


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Video Transcription:

Hello, traders. Welcome to the Pro Trading Course and the fourth module, Day Trades and Short Term Trades. Now that we have learned how to look for entries on a daily basis, I’m going to teach you how to look for exits and how to see if the trade or your trade idea has a good risk to reward ratio. What we’re going to do is we’re going to look for exits at the previous daily high and low. We’re going to use Fibonacci retracement levels and, of course, the pivots.

Now, if we go back to the chart, you can see that we are still on the same U.S. dollar-Canadian dollar one-hour chart, and I’ve added all the pivots that we deleted from the past lesson. What we’re going to do here, we already know that this is the high of the move, and this is the low of the move. So what we’re going to do is we’re going to draw a Fibonacci retracement level from this high to this low.

Identifying Exit levels using Hi-Los, Fibs and Pivots

And we are going to look for confluence between the Fibonacci retracement levels and the weekly pivots. And you can see that we found a very interesting confluence between the 50 Fibonacci level and the weekly support 1. Now, this is exactly what I’m talking about. We are going to try to find these kinds of confluences between Fibonacci levels and weekly or daily pivots. We are not going to be using the daily pivot, and, of course, we also have confluence between the daily support 1 and the daily resistance 1, all right? But the important level is right here at the 50 Fibonacci. So we are not going to be using the daily pivot, and we are not going to be using the daily resistance 2 and the daily resistance 3.

We are going to use the weekly pivot if we decide to take this further. But for the time being, I’m going to show you that this trade that has a 73 pip stop loss has a possible target of 145 pips, which makes it almost a 1:2 risk to reward ratio which makes it a great trade.

But not only we need the confluence between the Fibonacci retracement levels and the pivots, but we also need to find if we are in an important zone of support or resistance. What we’re going to do is we are going to find out by using the previous lows, all right? Because we are in a down move and we just went long, we need to find the previous areas of support that might be being tested as resistance. You can see that…

Identifying Exit levels using Hi-Los, Fibs and Pivots1

So what we need to do is find the previous areas of support and resistance that might be tested again. And I think that we can fairly say with accuracy that this is a zone that might be tested again as resistance, okay? Now, this zone is a little bit higher than our actual target, which is excellent because we want to get field on our targets.

We do have two zones. We have the zones that confluences with the weekly support 1 and the 50 Fibonacci level, all right, which can be and will be our target for this trade, right here. And we have this zone that might be tested as resistance, which is this area right here that we broke toward downside. Then we retested before breaking up again.

Remember, you have to read price action. You have to read the structure of the market. And if you remember how the U.S. dollar-Canadian dollar chart looked before we actually started working on that, I’m going to show you, this is how the chart looked like, all right? Zero indicators, zero fibs, zero entries.

After finding a great spot to go long, we found a great spot to take profits for 145 pip trade. And remember, if you’re trading one lot, that’s $1,450. And it really doesn’t matter if price moves beyond our exit, because we are taking short-term trades here. We are trying to profit from short-term moves in the market. And when we try to profit from short-term moves in the market, we try to profit from volatility, which means that we don’t want to see big retracements like this one of 120 pips that is going to erase 120 from our profits, all right?

Identifying Exit levels using Hi-Los, Fibs and Pivots2

So what we are trying to do is get into the market and hitting our targets as fast as possible. After we hit our targets, we are going to reanalyze and see what’s going on. But if you had a trade idea, plan your trade and trade your plan. And in this case, we have an almost 1:2 risk to reward rate. Actually, we have a better than 1:2 risk to reward ratio on our hands, and we hit our targets.

Remember, the zone of resistance, that price, might test what’s this one right here, between the 1,310 and 13,130, all right, this peach zone right here. But our targets were according to our rules, where we found confluence between the Fibonacci levels and the weekly supports, or the daily supports, in that case.

Identifying Exit levels using Hi-Los, Fibs and Pivots3

Remember taking profits there is because of this trend line, all right? Remember that this trend line might be tested and rejected and its confluence right into our target zone. But this is just an extra to our analysis. And what we’re doing here, we are analyzing price cycles. And in this case, we took a long position at a very important zone for a very strong, high-probability setup, and we took profits at a 1:2 risk to reward ratio.

And now, I have added the last piece of the puzzle. If you see, the chart has these red dotted lines in it. These are the previous daily high and the previous daily lows, all right? And as you can see, right here, the previous daily high confluences perfectly with our target area. So not only you are going to be using the pivots or looking for confluence between your Fibonacci retracement levels and pivots, but you are also going to look where the previous daily highs and lows are at.

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