After a long wait, I finally have a good set up that is playing out fine on USDCAD. The pattern was caught on 4-Hour. Drawing Fibonacci retracement tools from the two most recent swing highs to the most recent swing low stretches out Fibonacci retracement levels for potential bounce levels.The clusters are the significant levels. The thick black trend line was drawn using the close of swing highs on 4-Hour time frame while the thin black trend line was drawn using the close of swing highs on 1-Hour time frame -- together, they formed trend line cluster. The confluence between trend line cluster and Fibonacci cluster was supposed to be the best spot to go Short, but price breezed through it.
As it turned out though, price bounced off the cluster formed by 88.7 and 61.8 Fibonacci retracement levels (green lines). I placed a Sell Limit at 1.3044; Stop Loss at 1.3084 (39 pips) and Take Profit at 1.2859. The logic behind this is that if the downward move is to continue, price will form a new low. However, level 1.2914 is a significant level as it appeared to have bounced price on 1-Hour, 4-Hour and Daily in recent times.
EVENTUALLY
Not long after my execution, my entry was triggered. Price reached high and almost stopped me out only to form a bearish divergence (note line on Stochastic), before it declined. Trailing Stop -- 40 pips -- was initiated on seeing that my execution had been picked up.
When price traded into the trend line cluster, it formed a Hammer and rallied. Good thing the trailing stop had closed in 40 pips before it was taken out.
Profit/Loss: + 40 pips
Oseni Moshood ( Moshow) is a physicist, a blogger and a spot trader with years of experience. He trades only price actions partly because he thinks Economics is boring; or, probably because he failed Economics; and he loves fine artistic works.
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