16 Jun 12 - EUR/USD - H1 - Bearish Shark Pattern - Type 1 & 2 Reversals

In these trades which I have taken, they show the true reality of trading where not all trades are the home run types which will lead one to instant riches. There will be break even trades or even losses on certain days. As I have told Scott, this blog chronicles all my experiences in my trading and it is is sort of a trading journal for me. Therefore, I will keep my posts grounded and as brutally honest to myself. :)

Type 1 Reversal

H1 - Primary

In the case of this pattern's completion, it was near a resistance and the best fit for this bearish Shark Pattern was that of a 2.24 AB projection with the 0.886 0B retracemement level. Prior to the completion of the pattern, there was a RSI BAMM which was early, but to me, it was considered a valid pattern as the RSI assumed a downtrend following the RSI BAMM's completion which price action trended slightly higher.

As seen in the attached chart, following the establishment of the Terminal Price Bar, the price action stabilised and that was my early indication of a possible reversal.

H4 - Distal

As for the Distal timeframe, there was not much confirmation factors here except for the fact that the price action was testing a previous resistance at the region of 1.2636 region.

M15 - Proximate

The basis of a trade execution in the Type 1 Reversal in this case was basically due to the following factors:

1. A Bearish Harami (Candlestick Pattern) followed a bearish candle close at the upper limits of the PRZ which was also my early indication.
2. A RSI divergence which was a strong indication to me.
3. An finally a trendline violation which was my final confirmation to go short.

A short was triggered at 1.26358, but it was later squared off with a profit of 3 pips when the price action languished and broke above the primary reversal trendline. Since I strongly believe in abiding with the trade management rules, the trade was squared off. (The price action did seem nice on hindsight, and there will be days like this and it is something which I have come to terms with as this is part of trading).

Type 2 Reversal

M15 - Proximate

For the Type 2 Reversal, the trade was later triggered when the price action moved back to test the harmonic resistance.

The trade was triggered when the price action showed an early sign of trend change when the price action violated the rising trendline. Therefore in this case, the basis of entry was basically that the price action has violated the trendline and that the RSI was already signalling a downtrend in the proximate timeframe.

The position is currently open and it is still taking some heat as price moved higher. Since I have set a stop loss in place, I will respect it and see the outcome next week.

Update (18 Jun 12)

The trade for the Type 2 was closed when the Stop Loss for the trade was triggered, taking a loss of 30.1 pips.

Reflection

I was glad that I stick with the trade execution and management rules in the Type 1 Reversal trade and I was able to stay away from the market for the whole until this very trade set itself up. In essence, I am slowly mastering the aspect of removing to the need to trade and only wait for the right setups to come.

As for the Type 2 Reversal, it would still be early to comment. I have triggered it only when it fulfilled certain conditions for a trade execution and let's see what the market will give me.

Good trading and wishing all a nice weekend!