FX:GBPUSD In our earlier post, we identified a short setup when price broke below ascending trendline AND retested resistance with confirmation. As it turned out, it was a false breakout and I got stopped out of my trade as well.
This is why a consistent strategy and risk management is so important; As attractive as a setup may be, it simply reduces the element of chance in every execution. Apply that over a large number with a consistent strategy and proper risk management (risk-reward ratio), the odds of a trader being successful is as sure as the saying goes: 'The house always wins'.
Now, back to the chart. We see a clear and strong rejection at resistance, resulting in an bearish evening star doji pattern. While it does not necessarily mean that price will go under, we are setting ourselves up for an attractive Risk-to-Reward ratio.
Typically, for a double/triple top pattern, a good gauge for our Take Profit level would be 1x the size of the neckline (As shown on chart). Stop-loss would no doubt be above previous highs, which gives us a Risk/Reward Ratio of 3.45.
Are the odds in our favor? Well, yes. Could the price continue to push and stop us out of our trade? Definitely a possibility. The point is, as a trader we should always prioritize proper risk management instead of simply our winrate. Let's see if the trade can go in our favor this time.