This could have been a breakeven trade but since I was on a mobile platform, the hesitation when I was out cost me a loss in this trade. Then again, a lesson learnt.
Distal (H1)
There was nothing that set us up in this timeframe for a buy and all we can see was that price was consolidating in a horizontal fashion. Basically there were no confirmation factors seen here.
Primary (M15) - Type 1 Reversal
As seen in the attached chart, after the establishment of the Terminal Price Bar, there was no immediate signals to go long although there was a slight "price stabilization". In this case, I would have considered this a proper price stabilization as I would usually to see some price stabilization in the presence of an extreme RSI test. Following the "price stabilization", the price action rolled down just as the RSI entered the oversold area. Following this test of the oversold area, price started to stabilize and that was our cue for a Type 1 Reversal.
The validation on this timeframe was that the RSI rolled out from the oversold region and this validated the pattern.
Proximate (M5) - Type 1 Reversal
The Type 1 Reversal in this case offered a small window for the trade to be execution. The confirmation factors in this timeframe was firstly a completion of an impulsive RSI structure and the downtrend trendline violation.
As observed, this was a very short lived trade, but with proper trade management in place, the trade could only have broke even. This was the mistake committed on my part when I hesitated on squaring the trade which resulted in a loss of 25.6 pips.
Therefore, lesson learnt in this case is that we should respect trade management rules and stick to them no matter what.
What was interesting after the short Type 1 Reversal was a divergence which set up the Type 2 Reversal. In this case, there was some discretion needed again as the price action has went a little lower than the 1.13 XA Stop Loss Limit region for the pattern.
Primary (M15) - Type 2 Reversal
When it comes to discretion, this is where the deliberation will come in. In my case, I will usually go for it when there is a divergence with price within the PRZ as divergence seen on the RSI is one of its best signals. So, this is one of those borderline cases. This would have been a move which I would have missed, but I was just documenting this as a lesson. As I typed this entry, I started to doubt this as a proper setup as price has moved beyond the PRZ and thus it would have been avoided not matter how good it looks or that price reversed sharply after. We do not bother about it.
Proximate (M5) - Type 2 Reversal
This is where the pattern might show some signs of a not so good trade at hand even if we were to take it as there was a steep trend break to signal entry and after the play out, you will also notice a very steep price move and followed by a trendline break.
On hindsight, it may seem that the price took a very nice move up after the first reactive move's retracement, but frankly, when it comes to real time trading, I would have been out after the reversal trendline break.
Lastly, this will outline the importance of one rule, when in doubt stay out. I was initially tempted to take this trade but when the pattern was off the 1.13 XA Stop Loss Limit, I had my doubts and since I was out, I decided to just let it go and not be bothered by it.
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