I appreciate the fact that even after market environment changed from a demand channel to falling wedge, I didn’t panic. It is a testament to how much confidence I have in my analysis. In the recent past, somewhat similar changes in market environment played out differently. However, there is a looming feeling that I could have exited when I saw price declined from the Fibonacci retracement-retracement cluster - I did consider it.
It is an uptrend on 4-hour time frame; hence, I resorted to go long. Fibonacci retracement-expansion cluster formed. The region covered by the green lines is the resulting cluster after Fibonacci retracement tool was drawn from swing “1” to swing “2” and Fibonacci expansion was drawn from swing “2” to swing “3” and then to swing “4”.
On 1-hour time frame, a supply channel formed and price bounced immediately after testing its resistance – Bullish divergence formed as a result – which was enough reason to go long.
I went long at 1.0004, stop loss was placed at 0.9963, and target was placed at a higher price (1.0155) above the most recent high. This is in line with the bias that should the retracement end, price would trade higher.
EVENTUALLY
Unfortunately, price could only make it a few pips high before it was forced downward by a Fibonacci retracement-retracement cluster (region covered by the red lines). I didn’t give it much thought since the red cluster (which was a potential resistance) was in confluence with the green cluster (which was a support); so, I let price have its way with things.
When I realized market environment had changed into a falling wedge I adjusted my SL to accommodate the newly formed pattern without going beyond planned maximum limit of 45 pips. Soon after this measure, price declined further and stopped me out.
A critical look at the price at which I re-positioned my SL leaves the impression that I may have set myself up for failure. In order to not go beyond the 45 pips as planned, I re-positioned the SL such that even if price would eventually bounce from the support of the wedge, it would take very few pips to reach my stop and knock it out.
I could have avoided this obvious error, in truth, by exiting when price bounced from the red cluster.
Profit/Loss: -45 pips
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