Wednesday, October 2, 2013

2nd October 2013: Trade #2

SL = 1.2 pips
TP = 6.1 pips
Reward / Risk = 5.1
Transaction costs = 0.7 pips

Net loss = -1.2 - 0.7 = -1.9 pips

This trade didn't pan out. Being the Asian session, the EURUSD normally likes to range and I saw a good candidate for a reversal when I saw two candles respecting a near-term resistance level, with both candles being a pinbar and inside bar (albeit with a bullish close). There was also confluence with a longer-term trend line. I sold right near the top which allowed me to use a tight stop loss (1.2 pips). Price stayed stuck around here for the next 15-20 minutes, and as you can see, eventually took out my SL and broke out upward.

The duration of this "sticky" period around resistance got me thinking. Normally, if my trade was to work, we would see sell limit orders being triggered and longs taking profit. It shouldn't take long to soak up the liquidity at this resistance level, and we'd see a reasonably quick reversal downward.

However, we didn't see that. Instead, we saw the profit-taking and short-selling being absorbed quite happily. This would suggest that buyers with bigger pockets were entering the market to counter-act this bearish pressure. A time stop would've been good here. 

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