The first setup that we exited was a loss on EURUSD. The rationale behind this setup was very simple. We had identified a supply zone and price was bearish, therefore we had a bias to short this pair. Stop loss, sell limit and target placed. Price came up into our zone and showed some rejection slightly above our supply zone, which was a good thing.
Price then dropped nice and we were about 30 pips in profit before price retraced towards our entry. At our entry, price reversed once again and proceeded to make lower lows but failed, forming a double bottom (horizontal red line drawn). In hindsight, this was a clear sign that price had no intention to make lower lows yet and we should have cut our losses by closing for a small profit or moving our stop loss to breakeven.
This was our second trade of the week and probably the best setup of the week. The rationale behind this short was order flow. You will notice that on the chart we have a horizontal red line drawn, which is resistance and support. With this information in mind, we can assume when price was at resistance previously, retail traders would have shorted the market, leaving their stop losses above it. Therefore, there was a pool of liquidity above that area, and as it is with order flow, price is attracted to liquidity.
We placed our sell limit slightly above the level of resistance. Price actually spiked up into our order due to last week’s Non-Farm Payroll before reversing nicely towards our target. In hindsight, we could have had a better entry, but we had no reference area to base our entry off as you’ll notice towards the left of our entry was just a big red candle. As much as possible, some consolidation to the left would have been ideal, but you take what you can get. Additionally, we could have target more out of this setup as price dropped a further 25 pips. Nevertheless, it’s a +3R winner, and I don’t think our members will be complaining.
The third setup we took this week was a winner on a NZDUSD short. The rationale behind this was due to order flow. You’ll see on the chart that there are 3 red lines drawn. We want to focus on the second and third ones from the top. From these two lines, we can see that price made nice drops, suggesting that retail traders had entered the market and that somewhere in between these two lines were a cluster of stop losses. If you look directly to the left of our entry, you will see that that is the origin of a price drop, therefore we had our entry there.
Price came up to our entry before reversing nicely, however that reversal was short-lived as price retraced towards our stop loss. However, there was enough bearish momentum to bring price towards our target where we took a cool 40 pips and +2.67R.
In hindsight, our entry should have been slightly higher as the cluster of stop losses are usually placed above drops in price. Nevertheless, it’s our second win of the week and that brings us to a total of +4.67R for the week.
The last trade we took this week was a short on AUDJPY. The rationale behind this was a head and shoulders. Head and shoulder setups are pretty straightforward to me. Sell slightly above the right should. Or anywhere in between the head and right shoulder.
We were unlucky not to have ended the week with a winner as this setup was about 8 pips away from our target before reversing towards our stop loss. If it was one thing I would have changed, it would be to have the entry closer towards the head. With the same stop loss and target, we would have taken profit from it.
This brings is to a total of +70 pips (+3.67R) for the week. A decent week with 2 wins and 2 losses.
Have a good weekend and we’re looking forward to seeing you on Monday for our webinar!
Psst…we’ll even throw in a discount to get you started!