It is a wonder (the fact that it wonders me after years of trading is in itself a cause for wonder) how a trade can turn from being really good to being really bad. A review of this positions showed that I could have minimized my loss but there was certainly nothing I could have done to prevent this loss. I always knew counter-trend trades must be treated with quick and decisive approach, especially while hatching exit plans; but I never saw price rallying at that level. I had thought it would trade well into the trend line cluster if at all it would rally after - obviously, that was my undoing.
The setup started out as a Fibonacci retracement cluster. This was spotted on 4-hour time frame. Fibonacci retracement tool was drawn from swing "1" to swing "3"; and another was drawn from swing "2" to swing "3", together they form a Fibonacci retracement cluster (region covered by green lines).
On 1-hour time frame, a rising wedge formed. This complemented the bearish bias and when price bounced off the confluence between the resistant side of the wedge and the Fibonacci retracement cluster, I went Short with a Sell Limit at 87.48, Stop Loss 87.73 (pips - above the most recent swing) and Target at 86.58 (90 pips - below the most recent swing low).
The thick trend line was drawn to mark out higher lows on 4 hour time frame while the thin trend line was drawn to mark out the same higher lows on 1 hour time frame - this was a potential reversal zone, and it was worth looking out for.
EVENTUALLY
It was only after the trade had been triggered that I realized other price levels could serve as reversal levels. In the light of this, Fibonacci retracement tool was drawn from swing "A" to swing "B" , and Fibonacci expansion tool was drawn from swing "B" to swing "C" and then to swing "D" - this resulted to Fibonacci retracement-expansion cluster. The region covered by the indigo lines is the reversal zone likewise the region covered by the red lines.
Price rallied soon after it tested one of the indigo lines and rallied heavily. It broke my heart when I opened my chart. I closed in my Stop Loss to 87.69 (21 pips) to minimize my loss, which price took out gratefully with the spread.
I didn't get it wrong by much but I could have saved me some pips by tightening my stop at 87.57 while price was trading towards the trend line cluster.
Profit/Loss: -21 pips
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