Criteria for a successful short trade:
1) Trend must be clearly (lower highs marked in yellow).
2) Price must be below daily and retest.
3) Price is below 200ema
4) showing as overbought
4) wick rejection candle rejecting daily
Where to place stop loss:
I place my stop loss 10 pips above the current highs. So in this case, the current highs were of this that tested and rejected the daily level. Therefore my stop loss is placed at 1.32085
Where do I take profit:
Normally I aim for the daily S1 level when going short or the daily R1 level if I am going long. However, there is always the opportunity to gain extra profit if there is strong momentum in the market. If price breaks through the S1 level with heavy momentum and closes below that level then I will target the daily S2 level next.
To be safe, I will then move my stop loss to entry price at this point to remove any exposure from the trade.
I hope this little trade set up and explanation helps. It is a nice and simple strategy for anyone looking to start trading.
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