Mar 26
I’ve been trying to learn how to trade with the trend… but my primary strategy will still be to benefit from trapped traders.. Found a good trade today…
EURUSD 26 Mar
- Candle A seems to suggest a bearish reversal. However, the prior bullish trend was strong, and a single bearish candle is unlikely to result in a reversal.
- Candle B is a perfect trap for bears. It first dipped below the low of Candle A, only to reverse and close strongly, forming an outside bar.
- A good entry point would be one pip above the high of Candle A.
Mar 24
EURUSD 24 Mar (Update)
As predicted in the previous post, EURUSD did not manage to reverse its bearish trend.
Bar A seems to suggest a bullish reversal, which coincides with Fibo 61.8 and a MACD divergence. However, the prior bearish trend was too strong (9 out 10 bear candles). Therefore, it was not advisable to buy upon a breakout of the top of Bar A.
Bar B has the same high as Bar A, which is actually a double top on a lower timeframe, M5 in this case (refer to Figure below).
EURUSD 24 Mar M5
Bar C breaks above this double high but eventually reverses and formed a strong bearish candle, trapping bulls. The bearish trend resumes. A good point to sell would one tick below the low of Bar B on the H1 chart.
Mar 24
EURUSD 24 Mar
The chart above seems to show a perfect setup…
- MACD Divergence
- Price Action: Bull trend bar after a strong bearish bar, plus a reversal from a break of a channel trendline (not drawn)
- Fibo 61.8
However, I did not take the trade… I just have a strong gut feeling that this is a trap… I may be wrong.. but it’s better to err on the side of caution…
I think I feel uneasy about this trade because of the strong bearish trend before the reversal setup… 9 out of 10 of the previous bars were bearish (the odd one out being a small bull bar).. I need to see more confirmation before I’m willing to commit to a bullish trade….
