Although EURUSD has been in a uptrend of late we had a few factors that led us to believe we could see EURUSD move lower.
These factors include the following.
1. We were looking at the 1.2000 big figure level for a while as this level in general could be a strong psychological level for price to respect. Also we can feel that there would be a higher buildup of order flow resting at this level which again could increase the probability for price to reject here lower.
2. What really caught our attention was the larger pattern that can be seen even on a . The more participants in the market that can see the same structure the more the probability can increase for traders to take action when the pattern completes, especially the case when the pattern is seen on your higher time frames.
3. Convergence of factors - In trading, no one knows with 100% certainty where price will go next so as traders we have a responsibility to do our best analysis as possible to increase a potential profitable outcome. In this case both of the 2 factors above occurred at around the same point on the chart so when we saw price start to reject lower this opened the door for a sell.
After the pattern completed, we always want to use a lower (in the case for a sell, higher in the case of a buy opportunity) and wait for this to break to the downside as this will help increase the strength of the pattern holding and also give you a precise point on your chart to execute an order. Stop loss can go just above the 3rd drive high.