Lets unpack the pair that was a bit difficult to trade in the previous week and turned out to be a rewarding trade. I attempted to go short two times on this pair even though I acknowledged the possibility of a long move.
Following your trading plan rules will not give you all the lucrative trades in the market. When the rules are not met at a satisfactory level, then you rather miss the trade than taking a trade you are not confident with (NB: not that you will always win those you are confident with).
I have successfully identified the motive wave 1 from the previous higher degree correction. The first motive wave terminated at 1.28100, followed by a retracement (ABC) that terminated at 1.24198.
Less risky and more profitable trades from this correction are when the correction reaches the area of 61.8% and 78.6% fib retracement of the motive wave.
This correction depth is a guideline not a rule, therefore wave 1 correction which is wave 2 might not always reach for the desired depth, for a better risk reward ratio.
Because taking a wave 2 entry will require a stop loss order at the beginning of the previous wave 1. Taking wave 2 trade where the correction did not reach for the most desirable depth, we will be taking a high risk trade.
So... what is next?
We have noticed another motive move from the ABC retracement which has reach the desired level (2.61% fib expansion) for a 3rd wave.
Now I'm expecting a wave 4 correction up to the area between 38.2% and 50% fib retracement before I can go long for the final fifth wave of the current motive move.
A missed trade is better than a lost trade.
Following your trading plan rules will not give you all the lucrative trades in the market. When the rules are not met at a satisfactory level, then you rather miss the trade than taking a trade you are not confident with (NB: not that you will always win those you are confident with).
I have successfully identified the motive wave 1 from the previous higher degree correction. The first motive wave terminated at 1.28100, followed by a retracement (ABC) that terminated at 1.24198.
Less risky and more profitable trades from this correction are when the correction reaches the area of 61.8% and 78.6% fib retracement of the motive wave.
This correction depth is a guideline not a rule, therefore wave 1 correction which is wave 2 might not always reach for the desired depth, for a better risk reward ratio.
Because taking a wave 2 entry will require a stop loss order at the beginning of the previous wave 1. Taking wave 2 trade where the correction did not reach for the most desirable depth, we will be taking a high risk trade.
So... what is next?
We have noticed another motive move from the ABC retracement which has reach the desired level (2.61% fib expansion) for a 3rd wave.
Now I'm expecting a wave 4 correction up to the area between 38.2% and 50% fib retracement before I can go long for the final fifth wave of the current motive move.
A missed trade is better than a lost trade.