05 Jul 12 - XAU/USD (Gold) - H1 - Bearish Shark Pattern - Type 2 Reversal

This was a trade which was done last week. A nice trade done on Gold which is something I seldom trade. But, since a nice setup was observed on Gold, I decided to go short on it.

Despite a nice pattern completion at the Type 1 Reversal, there was not RSI validation when it completed and I was not at my computer when it completed and thus I have missed out on the Type 1 Reversal. On hindsight, if I was at my computer, I would have gone in on a fast trade since there was a RSI validation on the smaller timeframe and exit as per the trade management rules.

H1 - Primary

As seen in the attached chart, following the RSI's exit from the overbought region, the RSI was clearly showing weakness in Gold while the price action consolidated and that was an early indication of a possible reversal.

Therefore, the primary timeframe basically offered a clue of a possible weakness in the price action and that was good enough for me as a signal to look for a short on Gold.

H4 - Distal

Gold was seen testing a resistance near where the Bearish Shark Pattern completed. In addition, the RSI impulsive structure gave added confidence when it comes to shorting it.

M15 - Proximate

The trade was later triggered on a simple RSI confirmation. (Note: I have labelled it as RSI BAMM Confirmation and after looking at it again, it was basically a simple RSI confirmation but since I have taken the screen shot at the point of execution, I have decided to leave it as it is).

The short was executed at 1615.21 and the target profits are shown in the attached chart.

Trade Management

The trade was later closed at 1605.14, gaining a profit of 10 points when the price action violated the accelerated trendline.

In addition, as a usual reminder to remind myself to respect the trade management rules, the next attached chart shows the price action after the accelerated trendline violation.

This is how it goes and thus I have been constantly reminding myself that I will manage the trade as per the trade management rules and capture the highest probability, profitable move and I will not bother about any other further moves following the trendline violation as I am aiming for consistent profit. Yes, there will be days where the price retrace and then move down to hit the target profits and I have learned to live with it and be contented with my profits though.

Wishing all a great trading week ahead!