If you don’t have a clear trading strategy, short selling is risky and it’s difficult to take a sell setup like the one that we have today.
However, we frequently come across very similar chart setups like this one, and all of them should be traded pretty much in the same way.
We only need to decide where to set the stop loss and the target, but even this activity is rather simple.
In fact, we can use the Levels and Zones indicator and the previous price action.
In this case, we use both.
Moreover, by using also the Bottoms Tops Signal in combination with the RSI Exhaustion, we are able to clearly see and trade safely this Sell setup.
Trade setup – 2 Feb 2018
This forex setup on the TradingView chart is very clear:
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- The price and the RSI Exhaustion are in divergence
- The RSI Exhaustion is bullish exhausted
- There is a confirmed top
Additionally, the price is currently just below a major resistance level, so the chances that it will move lower are extremely high.
We just need to set a safe stop-loss slightly above the resistance indicated by the Levels and Zones and then pick a high probability target.
To do so, we look at the most recent price action and identify an interesting level, right at the bottom of the current upward movement.
This will be the target of our sell setup.
Trade update – 2 Feb 2018
The price is moving down quite rapidly and since it’s already almost halfway into the target, we move the stop loss to breakeven.
This means that from now on we’re in a risk-free trade.
Trade update – 5 Feb 2018
The price continues to move lower and the Bottoms Tops Signal just displayed a bottom.
Even if it’s a confirmed bottom, by reviewing our technical analysis we cannot find any confirmation for it to be a major bottom.
Moreover, since we are already well protected by the breakeven level, we maintain the trade open and we still expect the price to move lower.
Trade closed – 5 Feb 2018
The bottom turned out to be a minor bottom, as it looked like by the technical analysis, and after moving sideways for some time, the price made it’s final move down and reached our target for a 4.5x profit.
The initial technical analysis said it was going to be a clear trade to the downside and by simply applying our tested fx strategy we ultimately closed a very profitable trade.
Now we’d like to hear from you.
Do you think that trend reversals are too risky to trade?
Let us know by leaving a comment on the YouTube video above.
