GBP USD 5 Min:
Price fell from the open in an expanding triangle down channel hitting a major channel line (bold dotted line slanting down left to right) on the nose rising then just breaking it suggesting of a failed break out long trade. But there was no buy signal. Instead price rose and fell in 5 waves forming an expanding triangle with trend set up (see blue lines slanting up and down). After 2 lows the 3rd High reached a double top a measured move (bold dotted horizontal lines) the signal candle was the first candle clear of the 20 MA (gap bar) and touched the 50 MA. The entry candle also engulfed the signal candle indicating selling pressure had started.Entry into the trade broke a mini channel line.
There were 6 hard signs for the trade:
With trend expanding triangle set up, double top, measured move, 20 MA gap bar, break of mini channel line engulfing candle.
There was one soft sign: first touch 50 MA.
There were no deal breakers.
Trade management: 60% was closed at 4 pips which was the break of the potential up trend line then 20% was closed at the bottom of the bull candle at 6 pips. SL was then set to 1 pip above the mini pull back after the trade was triggered at BE minus 3 pips. Small red arrow.
Price wobbled tested the entry and the pull back position so the trade would have been stopped out if we had merely set it at BE minus 1 plus spread. Then fell so that some more was harvested at 10 pips and 20 pips. with the rest left for 30 pips as it would be not unexpected after the opposite expanding triangle trade failed to have a further drop equal to the original drop from open ie the length of the morning channel or at least the vertical height of the expanding triangle complex.
Another lesson in SL placement being as important as nailing the entry. It also means if you miss the entry just let it go as you will not be able to manage it as safely as you should.
Price action at its surgical best maintaining clarity of thought in apparent chaos with traders yelling buy / sell in equal numbers.
Thanks to Al Brooks