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PRICE PROJECTION
Projecting where price is most likely to go will help you hang onto a successful trade for more profit. A projection may also let you know that it is
time to get out if you entered the trade at the wrong side of the market.
There are many different ways of predicting where price is going. My favorite price projection formula tells us to measure the distance from the
highest point to the lowest point of the two cycles that created a new trend line. Once the trendline is broken we project the distance in the
opposite direction.
Let's take a look at the following chart:
By connecting our point 1 and 2, we get a new support line. Now we need to
locate the highest and lowest point that was established before price created cycle low at point 2. Red dots represent the data that we use to determine
the price projection. Now we measure the distance (the up arrow) and we project that price once the trendline gets penetrated at point 3 (the down arrow).
The difference between low at point 1 and high at point 3 is 27 pips. When the blue trendline got broken, price followed our projection beautifully.
There are no other "secrets" to price projection. We need to learn how to recognize our cycle high and low and how to draw proper trendlines.
Next, we just need to apply some basic math and calculate the distance between the highest and lowest points.
There are different ways at getting the target number (such as fibonacci retracement and expansion), however,
what we just covered here works as good as anything else and it is easy to understand.
Trendlines and price projection are so powerful that we only need a couple more indicators to confirm in what direction the price may be going,
and which trendline is most likely to be broken.
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