How many times in your trading career have you had a set up that you are so confident in and is so clean that you just enter it without checking for confirmations? How many times have you seen price retract into a demand or supply area with so much force that you simply think it cannot go wrong? This trade setup right here is a prime example of why it is so important to check for confirmations and ensure that the lower time frames are indicating exactly what you want to see prior to entering a trade and not entering a trade out of fear of missing out and buying as soon as the price dips into a demand zone. Let me know in the comments if this relates to you or you've ever had an issue like this.
The analysis on the four hour had me very confident once we had broken over the recent highs. We indicated after a very long and steady downtrend that we could potentially start seeing a movement to the upside. Once we did get a clear structure break, it was followed by a strong push to the downside in which I like to call The Archers pullback. Price retraced straight back down into our demand area, which means we ticked step one and now we were looking for step 2 and Step 3.
As you can see, looking at the one hour chart, we had a steady downtrend formed prior to having a strong news release which pushed price down into the demand zone. Once we had this trendline formed, what I simply wanted to see was an area of consolidation, potentially a descending channel. Then a break of this trend line followed by a pull back followed by a break of structure down on the 15 minute. But what you can notice is as we have this trendline drawn an we dip into the demand zone, that price didn't break the trend line. It simply went sideways and did form a descending channel, but to the point where we broke the recent demand and set a lower low. In turn, it made this analysis invalid.
It is highly important that with all trade setups like this, especially trading the higher time frames, that we dive into the lower timeframes to ensure that the demand or the supply is entering the market the way we're anticipating so we can trade the distance with confidence. If we do not wait for confirmations then we are sitting blind and entering what you would call FOMO trades. Entering with much higher risk. As we can see here, price can just rip straight through these areas and we must be prepared to not take trades. If we were to enter blindly into these areas, this trade would of resulted in a loss on the account.
Do you find this analysis helpful? Should we chat more about this in the future?
Yeahh same happened with me too… I was very much confident on this trade .As It Did form double Bottom… And Then Even Broke from upside.. When it came down I thought its a pull back.. so it will go back up… But it didn’t… instead it started falling down
the5erstrading
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@DADDZZ, Yeh it happens, it is important we understand what factors indicated this could happen and if there was anything we could of done to prevent a full stop from being hit.
srileyuk
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Yes if you look on the monthly weekly, price has done a bullish correction to 1.9200 to retest market bearish structure to continue further downside back to monthly support 1.74200
Agree completely. I got completely torched from the BoE decision and market disappointment with lack of 50bp rise (unlikely as that was gling to be). Held the trade far too long in what can only be described as the most rookie of errors. And to further confirm my stupidity and award for dumbest decision on a trade I thought it would be a good idea to not have a SL at BoE decision time given spreads would blow out and hit it too early. Oh yeah, and my position far exceeded what it should have been off the back of 3 very successful months and not sticking to the plan. So now it's time to rebuild.
the5erstrading
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@dplhood, Sometimes it happens, when traders get on a good streak overconfidence because a real thing they have to deal with. Have a mental reset, look for the indications that the trade wasn't going to work, then look for risk management measures to prevent it from happening again. Thank you for sharing.