*A live FX market example of a trendline break entry using multiple points of analysis*
Today’s blog post is following on with the topic of trading trend reversals and using higher timeframe analysis in conjunction with lower timeframe technical analysis tools to predict when a trend might reverse.
I am going to show you a trade entry that I took last week and am still currently holding on the USDCAD FX currency pair. Before I start, you can track the live progress of this trade LIVE via the TradingView platform by clicking on the link below.
I do all of my technical analysis and monitor my price charts on the TradingView platform because it really is so easy to use and has everything I need. Live price data, an infinite number of trading tools and indicators, the ability to make your own custom indicators and even an economic news calendar. Check out their website by clicking here.
Let’s start with the daily timeframe chart and I will talk you through my higher timeframe analysis.
You will notice this daily timeframe chart has been kept very clean. There are no indicators or extensive levels of annotation because it didn’t need it. Put simply, all I did was identify the prevailing trend and look to make sure I was on side with it. I had circled the previous swing high and swing low points and noticed there was a bearish trend with lower highs being made.
The daily candlesticks had begun to form wick rejections and the day before I entered (Thursday) the daily candle closed as a nice bearish wick rejection candle with a big wick and small bearish body. This is a good sign of a potential reversal.
The lower timeframes tell a similar picture with the lack of confusing indicators. In essence, all you need is a trendline and the ability to spot the main points of a trend and when it has been broken.
Although this is a trend reversal trade (1hr bullish trendline is broken and reversed), I am actually trading a trend continuation on the higher daily timeframe. And as I have said multiple times before, you want to be onside with the higher timeframe to get the best and biggest movers. This is where you will find the most profit and best reward:risk ratio positions.
I am not a fan of just entering a short position on the daily timeframe chart with a large stop loss because I feel there is a much better opportunity to use my knowledge to go to these lower timeframes and use my trendline break strategy to improve my profitability.
The 1hr chart shows the bullish trendline was broken with strong bearish momentum, a new lower low was made and price has pulled back to potentially form a new lower high. Therefore, if this short trade trend analysis is correct, I will now be trading in the same direction as the 1hr timeframe and the daily timeframe.
I entered short on the close of the 1hr bearish wick rejection candle. This candle was retesting the 1hr 50EMA and was below the daily pivot level. I had a nice and tight, 20 pip stop loss order which was above all of these potential points of resistance. If price was to break upwards from here then they would keep my stop loss order safe unless my trend analysis was truly wrong.
My first target profit level is shown on the chart at 1.31800. This is a previous price resistance level which I used a few weeks ago and it worked very well at keeping price down. I am therefore going to keep an eye on this level for any price reactions.
My long term profit target is at 1.30500 which is the previous daily support level shown on the first chart and on the chart below.
The chart above shows the current situation of my USDCAD short position that I entered last week. As you can see, price did reject the 1hr 50EMA and it held strong to produce a lower high which then lead in to this current downtrend.
Price is continuing to bounce off of the 1hr 50EMA as it makes its way down to my first target profit level.
Price Prediction/Trading Opportunities:
Going forward I believe the sell of will continue over the next. I will be looking to scale in on short positions when the markets produce more good reward:risk entries. I have already added to may short exposure on Monday with the first bounce off the 1hr 50EMA. This can be seen below.
I think that any intraday pullbacks will be good chances to look to get involved on the higher timeframe bearish trend. Just remember, don’t be too aggressive and look for trade entries that tick all the rules of your strategy.
Visit my instagram page and look at my stories for daily updates on how I am trading USDCAD over the next few days and weeks.
All my technical analysis is done using the TradingView platform. You can get access via the link below.
My preferred broker of choice is IC Markets. Low spreads and trading costs really help long term profitability. A link to their site is below.
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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.