NZDUSD 4 HOUR CHART - Long Trade Setup
This is a counter-trend trade setup! Counter-trend trading is riskier than trading with the trend as the sellers could come back in at any time and price action could go against your position causing a small loss. For this reason, I like to use the 4-hour chart when counter-trend trading so I can more readily detect when the sellers might be coming back into the market. Also when counter-trend trading I risk a smaller part of my account balance. For example, if I normally risk 1% of my account balance on a trade I would use 0.5% risk when counter-trend trading. This also helps to protect my account should sellers come back into the market and price action goes against my position.
Trade Setup:
Price action has now bounced off weekly support and has started to make higher highs and higher lows indicating an upward trend. Also, the most recent bullish candle has closed above the long upper wicks of the previous candles; see the black horizontal dotted line indicating a higher close; also bullish.
I have set my Entry at the high of the most recent bullish candle as I want to make sure the buyers are still in this market.
I have set my Stop Loss at the low of the lowest candle. If this market is in an upward trend then this Stop Loss price level should not get taken out prematurely. However, if the Stop Loss does get taken out the trend is not an upward trend and I don't want to be in this trader anyway.
I have set my Take Profit at the monthly Average True Value line. Normally when the market opens the month with the price somewhere near the middle of the range between monthly Average True Value and monthly support price will move upward to test monthly Average True Value before heading lower to test monthly support.
This trade may take 3 or 4 days to hit Take Profit. If it does not hit Take Profit within 4 days I will most likely close out the trade as the trade may be stalling out, in which case I would want to move on to another trade where there is more opportunity for the trade to run.
Trade Setup:
Price action has now bounced off weekly support and has started to make higher highs and higher lows indicating an upward trend. Also, the most recent bullish candle has closed above the long upper wicks of the previous candles; see the black horizontal dotted line indicating a higher close; also bullish.
I have set my Entry at the high of the most recent bullish candle as I want to make sure the buyers are still in this market.
I have set my Stop Loss at the low of the lowest candle. If this market is in an upward trend then this Stop Loss price level should not get taken out prematurely. However, if the Stop Loss does get taken out the trend is not an upward trend and I don't want to be in this trader anyway.
I have set my Take Profit at the monthly Average True Value line. Normally when the market opens the month with the price somewhere near the middle of the range between monthly Average True Value and monthly support price will move upward to test monthly Average True Value before heading lower to test monthly support.
This trade may take 3 or 4 days to hit Take Profit. If it does not hit Take Profit within 4 days I will most likely close out the trade as the trade may be stalling out, in which case I would want to move on to another trade where there is more opportunity for the trade to run.
Comment:
This counter-trend Long trade setup did not work out and is canceled. This was the second counter-trend trade setup that didn't work out that I shared this week. This is an example of the risk associated with counter-trend trades; the setups can be valid but the trade doesn't work out. Had I used market orders instead of buy-stop orders I would have been Long the market and would have been stopped out with a loss in both trades. When trading counter-trends it is advantageous to use smaller (less risk) percentages of your account balance, 0.5% of account balance instead of 1% of account balance, and Buy-Stop or Sell-Limit orders to reduce risk.