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The first reason I was looking at shorting was that on the daily timeframe, the market had reached a major resistance zone (as shown by the top green zone) and has historically rejected from that level. This, however, isn’t a solid premise for entry alone and I will discuss my reason for identifying a trend reversal in later sections. When looking at potential downside, I draw my extreme zone (bottom green zone) and my minor zone (middle green zone). I drew the middle zone because the market had paused there for a while a few days before and since we were still in an overall uptrend, I wanted to be cautious of rejection from this range for a bullish continuation.
Looking at the 4h you can get a better understanding of why I placed my minor zone at this level because it was a range in price that the market had traded at for a while before buyers took back over.
After identifying my zones, I wanted to wait for proper confirmation of a potential market structure shift to the downside. Looking at the 1h we can see that the market failed to create a higher high (at the black circle) and then broke the market structure (trend line) to the downside. At this time I began to look for entries on the lower time frame 30 minute with a potential to fill the range to our minor zone from the 4-hour time frame.
I entered by the first position after a high-quality FTR as it signaled to me that the market was in momentum and occurred after the market had fallen into a bearish market structure. I noticed that the market didn’t sufficiently fall all the way to my zone in the first day and actually traded back up to the FTR multiple times, rejecting every single time, so for that reason, I decided to execute more short positions at the red arrow after we saw another FTR with potential range to the downside. My last position was taken after we broke the prior minor zone on the 1h.
I closed my positions at the blue arrow after I noticed the market seemed to want to reject my zone and as we starting coming into the closing hours of Friday, which typically are slower with wider spreads.
I think that this trade was very well managed, but I might have been able to consider it a better trade if I didn’t execute that third position. Like my position on USD/CAD earlier this week, that position was slightly overextended. Overall this week was a good week to trade and provided me with 2 wins and 0 losses.
Have a great rest of your weekend and happy trading.