There are two ways to handle exiting this trade. One would be to cover costs and take some profits quickly. Begin taking additional profits as soon as the second reversal bar is in place, and then hold all remaining contracts at breakeven or better until we have some reason to believe the move is over and prices are going against us, or we need to get out because it is near the end of trading. This is the "continuation" method discussed previously. The other is the "violation method.

With the violation method you have a choice as to whether or not you would sell the entire position at the time of the violation, a violation being two reversal bars in any series of bars going in a single direction, or the making of a higher high in a down move or a lower low in an up move.

^ Second reversal

First reversal


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