*Learn how to spot current trend continuation opportunities and trade them!*
It’s a new week and a new month today. Whatever trades you took last month I hope you learnt from them and if they were good or bad it is okay so long as you gain something from them. Profit or experience, both are something you will have gained just from participating in the financial markets.
This blog post is another post trade breakdown for you to see how I analysed the USDCHF FX currency pair and why I took a short trade on my FTMO Challenge account. It was a fairly quick trade that produced a decent Reward:Risk ratio position almost overnight.
Before I start… as always my technical analysis is carried out using the TradingView platform which has everything you need to analyse almost any financial instrument from Commodities to Stocks.
You can go to the platform by clicking on the link below. Some of you may be eligible for a sign up discount!
Let’s look at the USDCHF price chart prior to the trade and I will talk you through what I saw and why I had a bearish bias for the FX currency pair.
If you have read my previous blog post you will know I normally start by looking for the current timeframe trends in the market to see what direction I should be looking to enter. As always… the trend is your friend and I look to stick to this phrase as much as possible. I have marked on the current timeframe (4hr) lower highs and lows to show why I had the bearish bias.
In regards to higher timeframe analysis, this style of trade is classed as “intraday” by some and basically it capitalises on the near term swings of the market. I was confident that just by looking at the 4hr timeframe trend and how price was moving consistently downwards that I did not need to check the higher timeframes on this one. If you wanted to you could have checked the daily timeframe chart which showed a nice bearish wick rejection of this level with 3 consecutive daily candles failing to close above the 0.786 fib retracement level.
I then applied the Fibonacci retracement tool to the previous swing high and swing low to get my levels where we might see resistance for price. As you can see in the chart above, price was rejecting the 0.786 fibonacci retracement level for a second time creating a basic “double top” style entry.
Below is the 1hr timeframe chart which shows these rejections clearer.
I entered a short position just after the 3rd 1hr wick rejection of the 0.786 fib retracement level. Below is a chart showing the short position marked on the chart with the stop loss and target profit placement swell as the total reward:risk ratio of 5.4 : 1.
I placed a fairly tight stop loss on this trade compared to my normal SL of around 30-45 pips. That being said, USDCHF is not a very “pip heavy” FX pair compared to say GBPNZD that moved 100’s of pips per day on average. This is reflected in the target profit which is only 108 pips to produce a trade with an R:R ratio of over 5:1.
TOP TIP: It is not about the number of pips you make that counts towards profitability. It is the reward:risk ratio that matters. You can make 1000 pips in a day but if you risk 1000 pips then it is only a 1:1 R:R profit. If you make 108 pips in a day whilst risking only 20 pips then that is the better option
Let’s look at how this trade played out.
You can view this trade live via the TradingView platform by clicking on the link below. You will also find my profile and lots of other trade set ups on there 🙂
As you can see above, the resistance at the double top held strong and price continued on its current bearish trend to drop down and make a new lower low at the fib -0.27 extension level. If you are not sure how to use fibonacci retracement & extension levels in your trading then I recommend you look in to them. They are very accurate when used correctly.
I covered fibonacci clustering in a previous blog post which you can read by clicking on the link below.
So there we have it, that is my post trade breakdown of a very simple yet effective short trade position on the USDCHF FX currency pair. Once again, I think the key message to take from this analysis is that it benefits you to stick with the current trend and just ride the waves.
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DISCLAIMER: None of the information posted on this site is to be considered investment/financial advice. Trading is high risk and you should only trade with money you can afford to lose.