The initial Type 1 Reversal was avoided as the pattern completion was too early that it did not even fulfil the minimum 0.382 alternate time projection.
Breaking the whole setup down:
H4 - Primary Timeframe
This was the timeframe which showed the setup clearly. Despite a slight expansion seen on the Terminal Price Bar and a following candle which tested the high of the Terminal Price Bar and which closed bearish, there was an early signal of price stabilization which hinted that a possible reversal was likely. In this case, I would still consider the setup to be valid as the price action did not close above the 1.0 XA retracement level which was the stop loss limit for a Bat Pattern.
In addition to the price rejection above the 1.0 XA retracement level, preceding the completion of the D point, the RSI has previously hinted a weakening in USD/CAD following an exit from the overbought level which gave this setup more weight.
Since the Type 1 Reversal occurred out of the permitted alternate time projection zone, I decided to monitor this pair for an opportunity, which later presented itself as the Type 2 Reversal, and that was my cue to go short on this currency pair.
D1 - Distal Timeframe
In the case of the Distal Timeframe, it can be observed that this pair was consolidating following a downward move and it was a very beautiful setup when the Bearish Bat Pattern completed at the resistance of the box range which was ideal.
H1 - Proximate Timeframe
Since there was a stalling behaviour within the PRZ, a short was executed slightly above the PRZ when the Type 2 Reversal occurred within the alternate time projection.
Following the execution, the trade did go through some heat where price continued to move up and finally took a plunge later.
The 1st batch was closed when the price hit the 0.382 AD retracement level, gaining a profit of 67.0 pips. The 2nd batch was left open for the price action to assert itself.
Reflection
In this trade, I have learnt that patience and discipline are important to the success for a trader and that I will only trade on the clearest setup and avoid some awry trades. It is important to note that not all setups will present an opportunity to participate in the action though and thus it is crucial to be patient and neutral when it comes to trading.
I would say that this is a nice trade and since I have been busy with work, this is a good chance for me to learn that I do not have a need to trade and that I will only trigger on the more promising setups.
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