The UK100, on the H4 time-frame, was in an upward move until the 27th of November when a higher top was recorded at 7447.2.
Selling pressure overwhelmed buying pressure as the bears started to find the price attractive, causing the upward momentum to be reversed.
A closer look revealed that the Momentum Oscillator displayed negative divergence between point a and b compared to the price at 7430.9 and 7447.2. This could have alerted technical traders to a possible reversal in the making.
After the high at 7447.2, the price broke through the 15 Simple Moving Average and the Momentum Oscillator broke the zero baseline. This further strengthened a possibility technical reversal in progress.
A likely critical support level formed when a bottom was recorded at 7392.6 on the 28th of November. Buyers tried to push the market higher but supply overcome demand with a resistance level forming at 7428.0 later on the same day.
On the 29th of November the UK100 broke through the critical support level at 7392.6 with a long position ensuing. Three possible price targets were projected from there. Attaching the Fibonacci tool to the lower bottom at 7392.6 and dragging it to the top of the last pullback at 7428.0, the following targets were calculated. The first target was anticipated at 7370.7 (161 %). The second price target was predicted at 7335.2 (261.8%) and the third and final target could have been expected at 7277.8 (423.6%).
Later during the 29th of November, the resistance level at 7428.0 was broken and the long position liquidated to protect trading capital.
This scenario provides a very good opportunity to discuss the difference in thinking between experienced traders and beginner traders. For a beginner trader this would most likely have been a bad trade as it was a loss. This would cause a mental state of pain or stress and make it very difficult to take the next good possible setup, thus causing a lack of consistency.
An experienced trader on the other hand does not associate a good and bad trade with a profit or a loss, but considers if the overall market structure was respected, a calculated risk taken while respecting the wave structure of the market and lastly whether the risk was then managed well or not.
In the above case all was done well so it would be defined as a good trade for the experienced trader. This causes no mental pain or stress and makes it very easy for the trader to look for the next good possible setup and take the risk. This means there is consistency in taking likely good setups, which in turn makes it possible to make a net profit over a series of trades.
Disclaimer:
This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.
Selling pressure overwhelmed buying pressure as the bears started to find the price attractive, causing the upward momentum to be reversed.
A closer look revealed that the Momentum Oscillator displayed negative divergence between point a and b compared to the price at 7430.9 and 7447.2. This could have alerted technical traders to a possible reversal in the making.
After the high at 7447.2, the price broke through the 15 Simple Moving Average and the Momentum Oscillator broke the zero baseline. This further strengthened a possibility technical reversal in progress.
A likely critical support level formed when a bottom was recorded at 7392.6 on the 28th of November. Buyers tried to push the market higher but supply overcome demand with a resistance level forming at 7428.0 later on the same day.
On the 29th of November the UK100 broke through the critical support level at 7392.6 with a long position ensuing. Three possible price targets were projected from there. Attaching the Fibonacci tool to the lower bottom at 7392.6 and dragging it to the top of the last pullback at 7428.0, the following targets were calculated. The first target was anticipated at 7370.7 (161 %). The second price target was predicted at 7335.2 (261.8%) and the third and final target could have been expected at 7277.8 (423.6%).
Later during the 29th of November, the resistance level at 7428.0 was broken and the long position liquidated to protect trading capital.
This scenario provides a very good opportunity to discuss the difference in thinking between experienced traders and beginner traders. For a beginner trader this would most likely have been a bad trade as it was a loss. This would cause a mental state of pain or stress and make it very difficult to take the next good possible setup, thus causing a lack of consistency.
An experienced trader on the other hand does not associate a good and bad trade with a profit or a loss, but considers if the overall market structure was respected, a calculated risk taken while respecting the wave structure of the market and lastly whether the risk was then managed well or not.
In the above case all was done well so it would be defined as a good trade for the experienced trader. This causes no mental pain or stress and makes it very easy for the trader to look for the next good possible setup and take the risk. This means there is consistency in taking likely good setups, which in turn makes it possible to make a net profit over a series of trades.
Disclaimer:
This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.