One, the Potential Reversal Zone was simply too big for me.
I have never been brave enough to trade such big “PRZ”. Two, the bearish bar
that formed immediately after price tested the cluster was just too long. I
could not stomach that amount of risk, so I let it go. I, however, will take
comfort in the joy of predicting, with precision, where price would bounce
from.
Red demand channel formed on 4-hour time frame. Since price
had formed a swing low (swing C), on 1-hour time frame, just before it rallied
to the resistance of the channel; I knew what sub-pattern that had formed; and the
right tools to use.
On 1-hour time frame, Fibonacci retracement tool was drawn
from swing “B” to swing “A”, while another was drawn from swing “B” to swing “C”.
The resulting “PRZ” is the region covered by the green lines.
The PRZ was too big for me; and though bearish divergence
formed, I was still not convinced. I would have triggered an order had the “PRZ”
been tighter, and set a target at 1.0805 (support of the channel).
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