15 Jan 12 - GBP/USD - M15 - Bearish 5-0 Pattern Type 1 and 2 Reversals

This is a trade with a breakeven on the Type 1 Reversal while the Type 2 Reversal resulted in a loss.

A post trade reviewed revealed the following possibility:

Despite the presence of RSI validation on both the Primary and Proximate Timeframes, I would have triggered a trade too early before the final confirmation of the Trendline Violation was even observed, which resulted in a small loss.

I had initially thought that it could be due to the fact that the price action did not test the resistance at the high of the Terminal Price Bar, but then again, I was earlier expecting price to form a lower high and thus this possibility would have been invalid. Therefore, my suspicion would have been my trigger, which was too early.

Although there was a last factor, I would not give myself the excuse that it was just purely the market forces at work as I had pulled the trigger before a the last confirmation of a Trendline Violation though.

Distal (H1) - Type 1 Reversal

There was basically nothing much on this timeframe for a confirmation. The only factor that was considered in this timeframe was that I was looking for a continuation trade to short this pair.

Primary (M15) - Type 1 Reversal

As seen in the attached chart, this setup was a not as ideal as I would like it to be as there was no RSI validation at the pattern's completion. Except for the price action as a confirmation following the establishment of the Terminal Price Bar, there was nothing else.

Proximate (M5) - Type 1 Reversal

Despite not having any secondary RSI confirmation on the Primary timeframe (which is why I would like to call it "Class 2" signal), the only validation was seen on this timeframe where there were a few confirmation factors which made me consider shorting the pair.

Although there was an overspill to the 0.618 BC level, the price action was unable to hold above it. Following the test of the 0.618 BC level, the following candle closed as a Bearish Engulfing Pattern which was my early signal of a possible reversal.
After which, there was an secondary retest of the RSI which set up a RSI BAMM which gave me added confidence for this trade.
The last confirmation in this case was the rising trendline violation which my final cue to go short slightly above the PRZ.

The short was triggered at 1.53310.  Since there was not much of a move, when the price action rolled out from the PRZ, I set the trade to breakeven as price action was languishing and I do not wish to take too much risk in this case. The trade was later closed when the protective stop kicked in and the trade got out at breakeven.

Type 2 Reversal

When it comes to the Type 2 Reversal, I guess my only reason which I could figure was that my trade execution was too early before my final confirmation of a trendline violation which contributed to this trade's failure.

Prrimary (M15) - Type 2 Reversal

My take on the completion of the Type 2 Reversal setup was when the price action stalled at the 0.618 BC level with a Dark Cloud Cover formation when the candle closed. In addition to the candlestick pattern, there was a small RSI Impulsive Structure which was my validation of the Type 2 Reversal in this case.

Proximate (M5) - Type 2 Reversal

Zooming down into the Proximate timeframe, although there was a nice Bearish Engulfing Pattern and an Impulsive RSI structure completion, the trade was triggered in the absence of a trendline violation. Therefore, it was because of the premature signal which contributed to the trade's failure.

The trade was triggered at 1.53362 and was later closed when the Stop Loss was triggered at 1.53550, resulting in a loss of 18.8 pips.

12 Jan 12 - GBP/USD - M15 - Bullish Crab Pattern Type 1 and 2 Reversals

This is probably one of the most interesting trades I have ever done as it covered almost every aspects of the Harmonic Trading Approach where we see trades triggered on the Type 1 and Type 2 Reversals in addition to the Trade Management aspect of the Approach.

Distal (H1) - Type 1 Reversal

Following the Bullish Crab Pattern completion, it sets up a divergence on this timeframe on a 1.27 XA extension while the RSI was just rolling out of the oversold region.

In essence, the divergence seen on this timeframe was my confirmation for a long on this pair.

Primary (M15) - Type 1 Reversal

Following the completion of the Bullish Crab Pattern, the price action stabilized following an RSI impulsive structure completion which validated an entry for a long position.

The hammer was basically my early validation of a reversal at hand and the RSI's exit from the oversold region further confirmed the setup.

Proximate (M5) - Type 1 Reversal

When it comes to the Proximate timeframe, the completion of a Complex RSI strucuture together with a Pattern Pattern was the initial setup for a long. Following the initial setup, the falling trendline violation was the final confirmation a a long position.

The trade was triggered at 1.53038.

Trade Management

For this trade, the trade was broken into multiple parts to secure partial profits along the way.

The 1st Batch was closed at 1.53287 when the Accelerated Trendline was violated, netting a profit of 24.9 pips.

The 2nd Batch was closed at 1.53602 when the price action traded up to the 0.382 AD leg, netting a profit of 56.4 pips.

The 3rd Batch, which was also the final batch and also the batch left for a discretionary run for profit was closed when the price action violated the Primary Trendline which happened to coincide with the 0.382 Trailer at 1.53278, netting a small profit of 24.0 pips.

Type 2 Reversal


Primary (M15) - Type 2 Reversal

Following the initial reversal of the Type 1 Reversal, the price action traded back to the PRZ for a secondary retest which set me up for another long this time round.

Looking at the price action in the PRZ, although the price action traded past the 2.0 XA region which was also the Stop Loss Limit of the patter, the price action failed to close below the 2.0 XA limit and thus the pattern was still considered to be valid in my case. In addition to an Impulsive RSI structure completion, the whole setup was also a divergence which gave the trade a greater potential.

Primary (M5) - Type 2 Reversal

My cue for a long position was when the RSI completed the Impulsive RSI structure followed by a falling trendline violation. In this case, the trade could have been triggered at 1.5260 region, but since I was late, I only to managed to trigger the trade at 1.52985 which was still okay, although less than ideal, since the price was still slightly below the PRZ.

The trade was later closed at the start of a new trading week when price action violated the Primary Trendline at 1.53055, netting a profit of 7.0 pips.

13 Jan 12 - USD/JPY - M15 - Bullish Butterfly Pattern Type 2 Reversal

In this example, the Type 1 Reversal was not triggered at all as the pattern completed before the 0.382 Alternate Time Projection which did not present an ideal trade execution zone.

Following the initial Type 1 Reversal's brief move, it set me up for a small buying opportunity.

Distal (H1)

In the case of the H1 timeframe, it was clearly supportive of the trade as there was a 0.886 XA leg on this timeframe which was providing a support and this was converging with the PRZ of the Bullish Butterfly Pattern.

In addition, there was previously an impulsive RSI structure seen at the completion of the Type 1 Reversal which indicated that this support was likely to hold.

Primary (M15)

As seen in the attached chart, although there was an initial setup seen at the Type 1 Reversal, the only reason that I held back on the trade was for the fact that the pattern completed outside the 0.382 Alternate Time Projection.

After the initial rally from the Type 1 Reversal, the price action went back to retest the PRZ. Despite a lack of a secondary RSI retest, the price action held at the point of the retest which made me consider a long on this pair.

Proximate (M5)

The trade was executed when the RSI exited from the oversold region after completing an impulsive RSI structure. In addition to the RSI confirmation, the was a Piercing Pattern seen on the price action which gave me added confidence to go long from here, which happened to be within the PRZ.

After triggering on the trade at 76.729, the trade took some heat before the price action actually reversed and traded out of the PRZ. The Target Profit was triggered at the later part of the day at 76.888, netting a profit of 15.9 pips.

In the case of this trade, the profit potential was not really fantastic and my basis of this trade was purely for the testing of the technical condition setups so as to ensure that I have consistency in my trade execution.

13 Jan 12 - EUR/USD - M15 - Bearish Crab Pattern Type 1 Reversal

This is another example of a trade where the trade was not triggered. In not triggering the trade, I was sticking to my strict trade execution rules as the pattern completion has exceeded the 1.618 Fibonacci Time Projection.

Despite a nice move down, it does not matter to me as I would only like to trigger trades in the permissible zone outlined in the Harmonic Approach. In essence, it all goes down into the aspect of Discipline. There will always be days like this and this is not within our control and thus it is imperative that we have to stick to our rules to ensure a consistent performance in trading.

Distal (H1)

In the case of the Distal timeframe, it does offer a confirmation in this case when the price stabilized after the pattern completion. In addition, the RSI has completed an impulsive RSI structure which rolled out from the oversold region. The other factor that negated this trade opportunity was that the price action has reversed outside the 1.618 Fibonacci Time Projection which would lower the probability of the trade.

Primary (M15)

Going down to the Primary Timeframe, it was interesting to note that there was an extreme price expansion seen in the Terminal Price Bar when it completed the pattern outside the Alternate Time Projection. However, following the establishment of the Terminal Price Bar, the price action consolidated while the RSI formed a complex RSI structure and rolled out of the overbought region when the price action reversed.

What is interesting in this pattern completion was that the Bearish Crab Pattern has morphed from the earlier Bearish Bat Pattern which was invalidated on its Type 2 Reversal as seen in the attached chart below. Therefore, it is important to manage a trade actively when they are triggered and respect what the market tells us.

Proximate (M5)

When it comes to the Proximate Timeframe, if it was not for the fact the pattern completed outside the Alternate Time Projection window, a possible small window for a trade execution at the 1.618 XA leg would have been at the area where there was a rising trendline which occurred with a Bearish Engulfing Pattern following the extreme RSI test.

It should be noted that although this trade was not triggered as it fell outside my trade execution rules, it does offer an opportunity to learn from this example when it presented an ideal trade execution example. Despite not triggering a trade, every pattern that presents itself will present a lesson along with it where I can learn and better my trading. From this example, it has instilled upon me the importance of knowing when to stay away despite a nice move cos it has further strengthened my Discipline.

12 Jan 12 - EUR/USD - M15 - Bearish Bat Pattern Type 1 and 2 Reversals

In the case of this example, it will highlight the importance of keeping to strict trade execution rules whereby no trades will be taken when there are no proper entry setups even in the event of a valid pattern completion.

It exemplifies the importance of discipline and patience coupled with the willingness to walk away from trades which do not offer us the ideal entries and thus serves as a reminder that not all pattern completions will be executed.

This is a great example as 2 important points will be highlighted:

1. The importance of abiding to strict trade management rules.
2. The importance of waiting for the exact technical setups to present themselves before even considering a trade execution.

Distal (H1) - Type 1 Reversal

In the case of the Distal timeframe, there was nothing much for a trade confirmation except for the fact that the pair was trending down. Although the price action has broken above the falling channel, the key technical even which I was considering in this case was the completion of the Bearish Bat Pattern completion as certain breakouts are simply shake out moves which will take some shorts out of the market.

Primary (M15) - Type 1 Reversal

In the attached chart, there was an extreme overbought test of the RSI preceding the completion of the pattern, which in my case would be an ideal case as such conditions will usually signal an exact reversal after the test of the entire PRZ with very little room for an overspill move.

In the case of the Primary Timeframe, there were 3 technical events here which validated the pattern's completion:

A primary confirmation whereby the pattern completed at the exact predetermined PRZ.
There was a clear price stabilization seen following the pattern completion where there was price rejection above the 0.886 XA level.
A RSI secondary confirmation preceding the pattern's completion.

Proximate (M5) - Type 1 Reversal

In the case of the Proximate Timeframe, although there was an impulsive RSI structure completion after the completion of the trade, the rising trendline violation only occurred after the price action rolled out from the PRZ. In such situations, this would not warrant a trade execution as I was unable to trigger at the ideal price which was predetermined by the pattern. The market will present another opportunity for us so long as we give ourselves a chance and thus it is imperative that we stick to the strict trade execution rules.

This wraps up the analysis for the Type 1 Reversal aspect of the pattern and what is more interesting is in the development of the Type 2 Reversal

Distal (H1) -Type 2 Reversal

When it comes to the Type 2 Reversal, after the natural reactive move from the Type 1 Reversal, the price action went back to retest the PRZ and drove the RSI into the overbought region.

At this instance, there was still no confirmation from the Distal Timeframe.

Primary (M15) - Type 2 Reversal

As seen in the attached chart, the price action seen on the Type 2 Reversal on the candle which tested the PRZ on a secondary retest was that of an extreme price expansion which was an initial warning that there would be a possible invalidation of the Type 2 Reversal.

In addition, at the secondary retest of the PRZ, the RSI was only entering the overbought region which was indicating an overspill to the upside.

Following the retest of the PRZ, the price action of the following candle showed a decisive continuation which prompted me to hold and observe. However, it was at the following bar which the PRZ was violated which invalidated the trade.

Proximate (M5) - Type 2 Reversal

When I zoomed into the Proximate Timeframe, it gave a very clear indication that the Type 2 Reversal would not have worked out for the following reasons:

There was no RSI validation on the secondary retest of the RSI at the Type 2 Reversal ideal completion point.
Despite a nice bearish engulfing pattern seen after the PRZ was tested, the lack of a RSI validation revealed a lot of the following price action which indicated that price might move further up. When the RSI tested and rolled out for the overbought region, the Type 2 Reversal was already invalidated as the price has since closed above the PRZ and that was out of the ideal execution zone already.

This was the example which proved to me that having strict trade execution rules which focuses on specific technical conditions are key to successful and I should demand a very clear setup before even considering a trade.

This is easier said than done and it has taken me a long time to learn about this rule and it all goes down to patience and discipline. With patience and discipline, it will only allow me to pull the trigger on high probability trades which are of high quality setups and I think this is important.

30 Dec 11 - Gold - H4 - Bullish Bat Pattern Type 1 Reversal

Following my post on 27 Dec 11 regarding a possible top or a possible buying opportunity, a Bullish Bat Pattern completed around the region of the possible support region at the range of 1652 are which confirmed a short therm buying opportunity for me.

Before we go into the pattern specifics for this trade, it dawned upon me one day that as Traders, we must know what are our Trading Plans. For example, along the way comes Mr Z and he says that he has a hot tip to buy a XYZ share and that it would go up, most people will just think that there might be a chance to earn some cash, but have they thought of the following questions?

1. What is the basis of a buy for this particular investment vehicle?
2. Even if there is a sound basis in terms of fundamental or technical, what is the trading horizon like? A month, few months or even years?
3. After that, have they considered the desired entry price range, the target profit or even the stop loss?

I am glad that trading has taught me many things and this is one of the lessons which I have learnt cos nowadays whenever I hear anyone saying that which stock is good, I will usually pull out a chart to see for myself. Although I am not trading stocks,but it serves as a learning experience for me. And in most cases, there were no basis for a good buy. This thought came to me when I was having a drink with my mentor and it was through this that I realised that the journey in trading ha changed me so much.

Having said all these, breaking the setup down:

Distal (D1)

On the W1 chart which is as seen below, it was a very nice setup which gave me an entry in going long on Gold as the completion of the pattern happened to occur at the same spot where price action met a support on the rising trendline.

A clearer picture could be seen on the attached D1 chart.

In addition, on the day of the trade execution, the RSI was seen coming out from the oversold area following a secondary retest of the area. The price action also has a lot to reveal here when the price action held above the rising trendline with a very long lower shadow signalling a price rejection at this area.

Primary (H4)

On this particular timeframe, this is where the pattern becomes a borderline case for a long position. However, since the price action held above the 1.0 XA region, I treated it as a valid pattern.

Observing the price action as the completion of the Bullish Bat Pattern before there was even a RSI validation, despite some price stabilization, the price action continued lower before having a RSI validation. Therefore, this exemplifies the importance of waiting for a RSI validation following a pattern's completion or that a RSI validation should occur prior to a pattern's completion which is ideal in most cases. In the attached chart, a zoomed out version of the chart which captured the pattern's completion which shows that much emphasis was put on the structural signal. With a valid structural signal, this is where I will consider a trade execution at minimum.

Proximate (H1)

When it comes to the proximate timeframe, this is where the price action following the test of the 1.0 XA Stop Loss region becomes obvious that a trade was possible.

Despite trading past the stop loss region, the price action reversed and stayed above the level. In addition, the RSI rolled out from the oversold region which gave us another validation to signal a trade execution.

The cue for triggering the trade came when the price action violated the descending trendline. In this case, the execution could have been around 1545 region but I had missed the entry only to trigger at 1557.87 which was around 12 points from the ideal entry point but since it was still below the PRZ, I would consider this entry to be acceptable.

The targets for the trade were defined as the in the attached chart.

27 Dec 11 - Gold - Weekly and Daily Charts signalling a possible top and impending correction?

The year of 2011 has about to come to an end and very soon we will be welcoming 2012. It will be a challenging 2012 ahead and I was just reading some news on some commentators saying that it might a be good time to buy on Gold since price has moved down quite from its all time high of 1920, but it is true? As for now, from the charts are telling me in the long term, I would be hesitant to go in long for now, but if certain levels hold, then that will be my consideration to go long.

Monthly Chart

As seen in the attached chart, Gold has been trending up for the past few years and having hit a peak at 1920, there were some interesting signals seen at this high. Following the high, there was a possible resistance seen here as price candle for Sep 2011 showed a Bearish Engulfing candlestck pattern. Following this, the price action has been trending lower. It might soon test the rising trendline and with a successful break of this trendline, I will definitely be staying away from a long position.

In addition, what is interesting to note is that the RSI divergence shouting out loud. There was a very clear divergence seen on Gold which is telling us that there is an internal weakening for now and a possible downward move seems really possible.

Weekly Chart

Zooming down to the weekly chart, it is clearly evident that we are currently in a short downward move for Gold as it has already violated a short term rising trendline and it seems to be moving down to test the longer term rising trendline.

In addition, the RSI has already moved below the 50 level which is indicating that Gold is currently trending down.

Daily Chart

This is where the picture becomes clearer and from here, there is a key level for Gold which will dictate the move for Gold in 2012.

As seen in the attached chart, following the high of 1920, Gold has been trending down and how do we tell that? Well, following the high, Gold has made a low and a new lower high. The downtrend will be further confirmed when a new lower low is made which brings the support level at 1532.35 to 1564.16 the key levels to watch out for. If Gold prices hold at this region, this is where I may consider a long position.

Having looking through these charts, I will ignore the rumours and not even bother about a long since there are currently no setups for a long anyway. Well, it all remains to be seen.

22 Dec 11 - USDCHF - M15 - Bearish Shark Type 2 Reversal

Another nice trade done on my demo trading while I am still focusing on honing my trade execution and trade management skills.

It is interesting to note that while I have posted a long example on USDCHF which is in a long term uptrend, why is it now that I am looking to short this pair? This is where it gets confusing to me even previously when I first started trading. In essence, when I am looking at the distal timeframe, I am usually looking for supportive signals to support my trade and the market conditions changes every time and thus we will have to be adaptable when it comes to trading and that we will have to see what the market is telling us. The market moves in cycles and very frequently, it will rotate between a uptrend or a downtrend. Therefore, in short, it basically depends on what is your focus at that point in time.

To simplify the idea discussed above, I think this is best explained by the chart attached.

I would say that this is one of those rare cases where both the Bearish Shark Pattern which preceded the Bullish 5-0 Pattern were both valid structural signals. This example exemplifies the notion that the market moves in cycles and that every move will be in a certain degree be related to the previous swings and this is what makes Harmonic Trading interesting.

What is even more interesting here is that this example emphasizes on the importance of a proper trade management too. For example, if we were to first trigger on the Type 1 Reversal of the Bearish Shark Pattern and wait for a home run, we will be met with a disappointment when the Bullish 5-0 Pattern was validated and the trade would probably ended up with a breakeven. Similarly, if we were to trigger on the Bullish 5-0 Pattern, we will meet another disappointment if we were to just wait for the price to simply move to the Target Profit when the price action moved back up to set us up for a Type 2 Reversal.

And this is where the discussion of the Type 2 Reversal for the Bearish Shark Pattern comes in as this was a trade which I took.

Distal (H1)

As seen in the attached chart, the price action was having a resistance at the 0.50 Fibonacci Retracement Level at the region of 0.93946.

In addition, following the impulsive test of the RSI in the overbought region, the RSI has rolled out from the extreme region which was signaling an internal weakening of the pair. There was also a divergence in this case of the Type 2 Reversal but I would not give this divergence a very strong rating though and just to acknowledge its presence.

Primary (M15)

This is where I guess I have more or less ironed out my issues with the Type 2 Reversal setup in the sense that I will wait for the right setups to come and accept nothing lesser than that.

In this case, as seen in the attached chart, I was very confident with the Type 2 Reversal in this case as I have observed the following:

1. The 1.13 0B level which was the Stop Loss Limit for the pattern held as price was rejected at this level.
2. There was a divergence seen on the RSI. The difference was very small but it doesn't matter so long as there is a divergence.
3. Price respected the high of the Terminal Price Bar.

These were basically my confirmation factors for the Type 2 Reversal for the Primary Timeframe.

Proximate (M5)

Basically the cue for me to take the trade on the Proximate timeframe was when price broke below the rising trendline following an impulsive RSI test.

In this case, I was looking to sell at a minimum of 0.93693 and my price triggered for the trade was 0.93772 which I thought was a really good price as I have executed the trade above the PRZ.

Trade Management

There was nothing much here as the trade did not move much and the trade was closed when the price action broke above the Accelerated Trendline.

A small profit of 10.9 pips was made here. At this point, as usual, I will remind myself that it does not matter whether the price was crash from here or not as I was capitalizing on the high probability segment of the setup and all I need to know is that I have executed and managed my trades on a consistent basis which is key to success in my live trading.

Reflection

The "Penalty Box" was not a bad idea after all as it has made me focus on honing my skills in trading the Harmonic Approach and I am glad that I have taken this step. Having said that, I will still be spending some time in the "Penalty Box" till I see some consistency.

It takes a lot of persistence and determination to be successful in trading and I have since committed myself to achieve this success in my life.

22 Dec 11 - USDCHF - M15 - Bullish 5-0 Pattern Type 1 Reversal

In this setup, I was unable to execute the trade on my demo account in view that there was only a small time window which this trade was to be triggered. In addition, the other reason that I was not able to trigger the trade was that I was unable to trigger the trade at my preferred price of under 0.93134. I was keeping to my trade execution rule where I will just trigger just beyond the PRZ for every setups and if such entries are missed, I would rather stay away from them.

Nonetheless, this was a nice example of how a trade will work out on a harmonic setup and how the price action will respect the PRZ.

Breaking the pattern down:

Distal (H1)

As seen in the attached chart, this pair has been trending up and the price was following respecting the upper and lower constraints of the rising channel despite some overspill to the upside and downside.

What was interesting in the distal timeframe that the uptrend will ensue was probably the swing failure point seen on the RSI as seen in the attached chart.

Primary (M15)

For the Primary timeframe, following the establishment of the Terminal Price Bar, it took while for the RSI to consolidate before exiting from the oversold region and this set up a Complex RSI structure. In addition, following the establishment of the Terminal Price Bar, the following price candle showed some price rejection which was an early validation that the PRZ was holding and after this price candle, the price action started to reverse. The happened simultaneously as the RSI rolled out from the oversold region.

Proximate (M5)

Breaking the Primary pattern down into the smaller timeframe, after the price action violated the falling trendline, there was only a small window to trigger the trade as price action soon rallied up following the complete test of the PRZ. The only reason why this was not so ideal to trigger a long trade was that the price traded slightly above the ideal price for a long trade and thus the reason why I chose to stay away. I would prefer not to chase price as the Harmonic Patterns would define an ideal price parameter for a trade.

In this case, this is a case of a missed opportunity where I will not bother despite a nice setup as the entry rule was not fulfilled.

Then again, for learning purposes, supposedly the trade was triggered, the trade management in this case would be to square off the trade when the Accelerated Trendline was violated. Regardless of whether the price will continue to rally, it doesn't matter after this as the idea was to keep to the strict trade management rules. If the trade was to be triggered at around 0.93190, taking into account the spread (which was above the ideal price of 0.93134), it would have been a 40 plus pips trade. This would have been a nice trade for an intraday trade.

21 Dec 11 - GBP/USD - M15 -Bearish Bat Type 2 Reversal

Following the brief Type 1 Reversal from the Bearish Bat Pattern, the price action went back to retest the pattern's PRZ to offer another opportunity for a trade.

Since I was previously having some difficulties, I have decided to experiment with a few different entry techniques which will be discussed in the Proximate timeframe section.

Breaking the whole pattern setup down:

Distal (H1)

At the point of the Type 2 Reversal setup, the Distal timeframe looks more promising this time round as the RSI has rolled out from the extreme overbought region.

With the 0.50 Fibonacci Retracement Level acting as a resistance and the RSI coming out of the overbought region, this was my confirmation for a trade.

Primary (M15)

When it comes to the Primary timeframe, things just got better. Firstly, it was very obvious there was a divergence. In addition, the structural validity of the pattern was still intact as the price reversed at the 1.0 Fibonacci Retracement Level which meant that the pattern was valid. In addition, the RSI divergence was also indicating that there was an internal weakening in this pair.

Proximate (M5)

Having the confirmation from the Distal and Primary timeframes, this is where I decided to experiment with the various entry techniques.

1. Candlestick Patterns in the absence of RSI extreme test conditions

In the attached chart, my cue to go short in this technique was in view of a Bearish Engulfing Pattern while having in mind that the RSI was trending down. In other words, there was not much confirmation in this case except for acknowledging the candlestick pattern as a confirmation. This proved risky as following this entry, price continued to rally and the trade took quite a bit of heat and risked having the Stop Loss triggered. Therefore, this is definitely a no go for future trade executions.

2. Trade execution with a RSI divergence

For this method, I would consider this an early entry where I will have maximum potential while having lesser confirmation. After triggering the trade, price was able to hold around the area and fall. This technique can be considered as the main confirmation here was the RSI divergence which gave me the confidence.

3. Trade execution with RSI divergence and Trendline violation.

In the last entry technique, it offers a lower risk when it comes to the execution. However, with more confirmation, we will have to pay the price of having a later entry which we mean that we can only trigger only at a lower price. (Despite a lower price, I was still triggering above the PRZ). This would probably be my preferred technique as it gives me more confidence when it comes to taking a Type 2 Reversal Trade.

Trade Management


In terms of the trade management, the trade was closed when the price action violated the Accelerated Trendline. Regardless of what will happen later, be it that the price will crash after I square off the trade, it does not matter to me already as it was all done in the line with the Trade Management rules.

All in all, the trade gathered 26.8 pips in profit for my preferred entry technique while another 36.8 pips for the more leading entry (Technique 2).