*Editors Note – After reviewing this trade further I found an instance where it doesn’t work so it is being put on hold for further use. The theory behind it is still in tact in the post below*
As my trading setups continue to evolve I have discovered one that is working extremely well for me. At first, I just called it the Lightning Trade due to the way it looked like a lightning bolt when it worked as it should as a breakout trade setup. Then as I continued to meditate and refine my trading I found that using one small adjustment made it even more profitable.
I had been searching for a break out trade setup and this is what I discovered from what you will read here and in the video. This is currently my favorite trading setup I am using and is accounting for the majority of my trades. The 38-127 trade is the other one I use and will do a post about it at another time.
The Reverse Lightning Trade Setup – A Break Out Trade
Basically what you do is look for a pivot low and a pivot high. Then depending on what is happening or which way you want to trade, you wait until price breaks the low or the high. Then this is where the 1st exit comes in. Here is the picture of a short and long setup.
For the Reverse Lightning Trade, you look for the long pivot points by getting identifying the bottom pivot point and then looking to the left for the top pivot point. Then once price breaks the top pivot point that is the signal for the beginning of the trade.
With the short setup for the reverse lightning trade, you do the opposite. You find the top pivot point and then look to the left for the lower pivot point. Once price breaks the lower pivot point then that is your entry to signal the trade live.
What Happens if the 1st Exit is Not Hit?
Even though the 1st exit is at the 127.2% Fibonacci extension level it does not always get hit. But that is why I have other rules I use for this trade in case the 127.2% does not get hit. I just don’t give up and take a loss, I get in at other areas and move my exit.
So the exits now are for the short setup:
If price breaks pivot point low then 1st exit is the 127.2% Fibonacci extension level
But if price retraces to the 38% Fibonacci retracement level before hitting the 127.2% Fib extension level then the exit moves to the low pivot point.
All exits move to that level. The way I trade I have my exit slightly above the level if in a short trade. When in a long trade I have my exits slightly below the exit level. This ensures I get filled and get out of the trade. I have seen numerous times when price goes and ticks the exit to complete the trade. But it would not have been enough of a touch to get me out of the trade. That is why I always get out a little sooner than the final exit.
What if Price Continues to Go Against Your Exit?
If price continues to move against you and never hits the moved exit of the pivot low then there is one more move you must make for this setup to be successful. It will be the last time the exit moves.
When price continues to move against you then you have an order ready just above/below the 0% Fibonacci retracement level. Once price hits it then you move your exit just above/below the 50% Fibonacci retracement level. If you are short your exit goes just above the 50% level. If long then your exit goes just below the 50% level. The picture below and the video will show it better.
If price continues to move against you then you don’t have to do anything. The exit stays at the 50% Fibonacci level. You don’t have to move it again. But what I like to do, especially in Forex is to have limit orders waiting at the reverse Fibonacci extension areas. Typically I have an order waiting at the -127%, -143%, -261% and the -423%. I am waiting for a big flash move to go against me in order to get in because when the price comes back you make amazing gains. You just have to make sure your margin can handle it.
This trading style isn’t for everyone. It is what I created that works for me. That is what you must do as well. You must create a trading style that works for you. How do you do that? Below I have the link to the post I did regarding meditation. That is how I created my own trading style that has made me profitable. Before when I tried following everyone else’s trading styles, I was a losing trader.
- 1st entry is at the breakout of the pivot point high
- 2nd entry is just above/below the 38% Fibonacci level
- 3rd entry is just above/below the pivot point low
If you do get in at the breakout, (the 1st entry) then I always have the 3rd entry to be at least 2X the amount. This ensures when price rebounds your way and hits the 50% Fib exit that you will be profitable overall. I don’t always take the breakout entry and sometimes I even miss the 2nd entry. It just depends on how much margin I want to tie up in a trade. Sure I’ll miss plenty of good breakout trades but I always monitor how much margin I would have to use when trading the Forex market.
- 1st exit is 127.2% Fibonacci extension level
- 2nd exit is pivot point high if long and pivot point low if short
- 3rd exit is just above/below 50% Fibonacci retracement level
A key point is once one of the exit levels is hit then the setup is over. I do not keep looking to get in at other levels. Once one of the exit levels is hit then that trade setup is done.
Video: How does the Reverse Lightning Trade Setup Work?
Popular Links
Here are a couple of links if you are looking at how I view the market and some trade setups. You can create your own trading style and setups. Quit paying losing traders to teach you. The only thing they teach is how to lose money.
My Robinhood Shameless Plug
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My Robinhood Review: https://evancarthey.com/review-robinhood-trading-service-with-no-fees-part-1/
