And as yesterday’s forex session neared it’s close (Wednesday) we fully exited the position early at 1.1409. We were long from 1.1275. We usually try to let winners like this run unless the market provides a clear and compelling reason to exit sooner based on the RULES of our swing trade strategy.
So what changed? First, the session produce a bearish pin bar on the daily time frame. In and of itself that is not enough for us to make an adjustment or close a position. Making judgements on single candles often leads to getting faked out by price noise. What makes this pin bar compelling is WHERE it has printed. If you observe the peak established just a couple of weeks earlier, price did not successfully break beyond that resistance.
That failed breakout can be interpreted has many longs now caught, who will contribute to the selling pressure as they are stopped or margined out while new shorts are jumping in. Combined with the bullish reversal in the U.S. Dollar Index, you now have the recipe for an aggressive swing trade short. Why aggressive? It is counter trend which means IF we were to take this short, we would adjust our size and targets more conservatively in order to compensate for the risk of the broader trend reasserting itself.
Keep in mind, many in the forex world tend to believe you need to be an economist to successfully maneuver in these markets. This is nothing more than a misconception. All financial markets are driven by the same two irrational forces of greed and fear which means they can be timed by recognizing patterns of price “behavior”. We can trade the EUR/USD, Bitcoin, Gold, or stock the same way because we have only one objective in mind: to capitalize on short term price momentum.