The first setup we took profit from was actually left over the weekend from last week. It was a long opportunity we had on NZDUSD due to a demand zone which had formed. In hindsight, the demand zone had failed as price had closed below it, but price still found support to reverse.
You can see that before price had reversed, price had actually retested our demand zone twice. This usually means that we should cancel our order. However, I was keen on this setup as price was on a decent short term bullish run. Therefore, we left the order open over the weekend and it got triggered before running towards our target pretty smoothly.
Nothing better than a perfect entry. This was a order flow setup we had identified. At the first arrow on the chart, you can see that price had made a small bullish run, which meant that there were retail buyers in the market. Assuming that most of them had caught the start of the move, they probably had stop losses below their entry, which was below the blue line. Their stop losses provided liquidity in the market, which meant that price would have been attracted to that area before potentially reversing.
The idea behind order flow is that we want to look for areas on a chart where retail traders place their stop losses. Because the order is a buy, their stop loss is a sell order. Think of it this, if you buy something, and want to exit that trade, you need to sell it to someone. That means, to exit a buy trade, you can either take profit or get stopped out, both of which require sell orders.
Assuming that institutions are looking to buy, they need someone to sell it to them. Therefore, these stop losses clustered below retail traders’ entry serve as liquidity to institutions. Institutions are able to buy from the sell orders of retail traders’ stop loss, at the expense of retail traders’ loss. I have to admit, we got a bit lucky with the entry as it was perfect, right to the pip. No complaints though, as price shot up quickly towards our take profit for a nice 3R winner.
Psst…we’ll even throw in a discount to get you started!