Entering trades is often the easy part of trading. You conduct your analysis, wait for your signal then enter. Where some traders fall down is when it comes to the exit. In this article we’ll look at a recent trade I took and why I decided to exit at the location I did.
In the image below you will see the daily chart of the NZDUSD, taken last week. Daily supply is marked in red but I have also included another line in purple. Now if you look to the left, you’ll notice that back in May 2013 there was major resistance at that level. Price dropped sharply from the area and continued to fall over 800 pips. This is also resistance from August 2011.
If you move up to the weekly chart you will further see the significance of the previous rejection at the purple line.
The supply on the daily is also clearly visible on the weekly too. Staying with the weekly chart, you can see that a big green weekly candle closed above purple resistance line last month which indicated to me that this resistance level at the purple line had now turned to support. Whilst I was quite happy to short from the supply above, this was the first point on the chart where I anticipated a possible big change in direction.
As usual when price hit the daily supply level I dropped down to the H1 to see the nearest demand. When this was engulfed, I identified the supply which I believed to be the source and waited for a retrace.
Now there where two possible entries for this setup, both on the 5m chart. The one which I took is below.
I wanted for the same QM setup that I always use for shorts. Next there was a fake out just like I talked about in my previous article. Price broke the H1 supply and came back down engulfing the nearest demand levels in quick succession. If you weren’t already in the trade, this was your second chance. (the better setup to be honest). Next a supply and demand swap zone formed which was the entry point.
My stop was above the H1 supply by a few pips or so. Now price did come very close to my stop but it did not kick me out. The prices with my broker are slightly different to those on Trading View.
Price continued to fall and I was out by the previously identified purple line. Price did fall another 50 pips or so but I had 100 safe pips and I was happy.
After my exit price did indeed turn and rally from the area I had marked and it has shot back up way past my initial entry. As I write it looks like it definitely going to continue heading north. Time will tell.
The key point here is that it’s a good idea to consider the weekly as well as the daily when looking at targets which is not something I have always done in the past. Higher Timeframes are king
I hope you found this useful