With the new insights to my trading, I attempted another trade today. It was a nice trade where there was more confidence in the trade trigger except for the fact that the trade yielded only 0.5 pips in profit. Then again, with proper trade management in place, I will have to look forward to another opportunity. The key in this case is to be consistent with the trade execution and trade management.
I would consider this a borderline case where I would trade this pattern as it completed. Since the pattern completed slightly above the stop loss limit area, there was a call for a bit of discretion here. With the RSI signals supportive of the trade, I went in to short this pair lightly and conservatively.
Distal (H1)
There was nothing seen in the RSI structure for the Distal time frame except for the fact that the pair was trending down and that it was retracing back to test the upper limits of the falling channel. This sets us up for a trade in the direction of the predominant trend.
Primary (M15)
This is the part where there was a little bit of discretion needed. Firstly, the Terminal Price Bar exhibited some extreme price behaviour, but after it's establishment we start to see some price stabilization where the high of the Terminal Price Bar acted as a resistance for the following bars. In addition, there was an impulsive RSI formation which exited from the overbought area which gave us a total of 3 confirmation signals.
The confirmation signals are:
1.Price stabilization following the establishment of the Terminal Price Bar.
2. High of Terminal Price Bar acted as resistance
3. RSI overbought test.
With the above in mind, I was looking to trigger the trade at the region of 75.300 to 75.330.
Proximate (M5)
With the entry price in mind, zooming into the Proximate time frame serves to confirm what the Primary is telling us. In here, we are also looking for more confirmation signals to confirm a trade execution.
For the trigger for this trade, I went in a little earlier when I saw price broke the accelerated predominant trend line. Following this violation of the trend line, there was another confirmation which confirmed the reversal when a divergence occurred.
There was not doubt that the trade did suffer a slight bit of heat before reversing and this is characteristic of price action as price moves in waves and we will just have to let the price action assert itself. What is most important is that when the trade is triggered, we know that it was triggered with a myriad of technical conditions which confirmed the entry.
This actually exemplifies why we look for RSI conditions to be fulfilled as after an extreme test of the overbought or oversold area, price will usually have some correction. Therefore, with the use of the RSI coupled with the Harmonic Patterns, it allows us to have a high probability trade as we are expecting price to react in these areas before continuing or that they will reverse altogether.
The idea of looking at all these signals seemed a little tough to me initially but after going through some past examples, it will actually come naturally and as Scott was emphasizing, these confirmation signals will give us a higher probability trade and thus it is important to look out for them.This is totally different from my initial understanding that I will have to look for specific price pattern or candlestick pattern to trigger and thus this was a mind blowing experience. In essence, I was looking for a zone to assert itself and with the confirmation factors seen, I will trigger at the predetermined price at or just beyond the PRZ.
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