It's days like this that make me a happy trader.
This trade was actually a loss. My flu cleared up alot tonight so I took the opportunity to trade the European / US overlap session on the AUDUSD.
Price had been rising all week, so chances of a bearish reversal during Friday's NY session looked very good as intra-day and intra-week traders close their long positions before the weekend.
(click to enlarge)
I was looking for a chance to short. When price broke a signficiant S/R level on the 5M chart, I looked for a retracement back to S/R and identified a HVLR (high volume low range) candle on the 1M chart. I went short on the break of the candle's low (marked purple).
Price didn't do much in the next few candles. It wasn't making any new highs so I sat tight. Then I noticed another HVLR candle form, just a bit beneath the previous four candles (marked yellow). Would it be sellers or buyers entering here? I wasn't sure, so kept the trade open. Price catapulted upwards a few candles later and hit my stop loss.
Price quickly fell afterwards to 0.93000 and hit my original profit target.
A few things about this trade.
+ My stop loss was tight, giving me a reward of 3R, so my R:R was very good.
+ There was no way that I could've predicted such a deep retracement. My tight stop loss got me out with little pain.
+ Price generally behaved as I predicted (falling to 0.93000).
+ My profit target was good (just above 0.93000).
- I didn't know how to interpret the HVLR candle marked yellow on the 1M chart. When compared with the previous four candles, the candle would've indicated buyers moving in. However, in the context of the swing up (11 candles), it could also show sellers. In hindsight, it's easy to say to get out when unsure, but since my reward was 3R, I thought it would be best to sit tight and not spook myself out.
Overall, I liked this trade. It wasn't the result (which was bad), but the bits of knowledge that I gained.