EURUSD 5 Min:

Today was setting up for an expanding triangle. Technically price had dropped to a third lower low and was right on the trend line joining the two previous lows with a small overshoot that made it even more relevant. This was also an exact measured move from the high of the day and the 7am price. There was every reason to assume that price would rise back to 7am and form a daily doji candle. I was calling this on the forum. However buy signals did not materialise. What we were presented with was an engulfing on the 5 min up to the 10MA and close to the down channel line. A lot of aggressive bulls assuming the above expanding triangle reversal would have gone long ignoring the 10MA hovering just above and the fact that the down channel had not been tested yet . Price peaked at a measured move from the initial small spike up went through the 10MA and crucially for the first time since being in the down channel clipped the 20MA producing the first small peak a High 1. I then called a Low 1 short (although some would have called it a Low 2 as it was within the same complex where the first push up occurred before the engulfing although strictly it was not as there was a further lower low making this a true Low 1). The bulls would have panicked seeing price hesitate and would have put their stops 1 pip below that High 1 candle. Although a Low 1 formed the short was never triggered as it dropped only 0.3 pip below the signal candle. Price rose and produced a second peak a High 2 barely pushing above the High 1 and again closing after selling into the close. This produced a Low 2 short signal the entry of which also broke a mini trend line. Never trade into a trend line before it has been tested but an entry going across one is good. When price fell one pip below the signal candle the jittery bulls finally closed and this was the entry point for the short. Reasons were: Low 2 short in a down trend off the 20MA, double top bear flag, failed break out of down trend channel, measured move and break of mini trend line ie 6 hard signals and no deal breakers. -minimum for a trade is 3 with no deal breakers.  I closed half at 4.5 pips then another 25% at 7 pips where it struggled. I put my SL at 1 pip above the small pull back after I entered the trade and set TP from the remaining 25% at 2 pips above the low of the day as there was every reason to assume it would be tested. Price rose missing my SL by 0.8 pip and fell to my TP. This was a salutary lesson in one of never assuming. Those bulls who assumed an expanding triangle given an excellent technical set up but ignored the price action lost. This short netted 4% increase in equity.

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Comment by Daologic on January 31, 2014 at 4:19pm

Amazing! I hope I will have more time to study this! Thanks!

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