Today we have another great Short Selling example!
It’s on a Forex pair but the same principles apply for shorting a Stock or any other asset.
Just like we discussed in another Short Selling example, a short position can be very profitable!
The downside?
There’s not really, except for the fact that you must be careful with short selling.
Luckily, when you follow a few simple rules you can trade a short position just like any other Trading opportunity.
With the Bottoms Tops Signal and the RSI Exhaustion, we are able to identify what appears to be a very interesting short trading opportunity on our TradingView chart.
The only concerning thing is that the Levels and Zones indicator says that we are sitting just above a support.
This might pose a problem in the initial phases of our short selling strategy execution.
However, if the price moves lower (as we are expecting) then, such support will turn into a resistance.
What does this mean?
It means that it will play a huge role in pushing the price significantly down.
So, as long as we trade our short selling strategy safely, then we’re good to go.
Below here, you can see our whole live short selling trade commented step-by-step.
Trade setup – 16 Dic 2019
We have an interesting sell setup because:
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- The price is moving higher, while the RSI Exhaustion is moving lower.
- The RSI Exhaustion is bullish exhausted (colored green).
- We have a confirmed top
We set our stop loss slightly above the most recent highest price level while we set the target all the way down to the major support level identified by the Levels and Zones at the bottom.
The initial risk in this setup is that the price is currently above a support, but it started as a resistance and, considering our analysis above, it should turn again into a resistance soon.
Trade update – 16 Dec 2019
The price is moving lower as we expected.
Trade update – 17 Dec 2019
The price is still moving lower and the RSI Exhaustion goes down as well.
Trade update – 18 Dec 2019
The indicators and the price action are still all looking good.
We should definitely be able to reach our Profit Target, which is now close.
Trade closed – 19 Dec 2019
Towards the end, it got frustrating because the price almost reached the target twice, before ultimately touching it the third time.
Well, it turned out to be a very nice trade with a 4x profit.
It took a few days but without any significant concern except for a slightly frustrating price movement towards the end.
If you were previously scared about short selling, you can now see how profitable it can get, when traded correctly.
What’s your attitude towards short selling?
If you see one, do you take a short position? Or maybe you just skip it because it’s too risky?
Share your trading experience with fellow traders by adding your comment to the YouTube video above!
