In this live Forex trading example I attempted to trade a bounce from a bearish trend line on the M5 chart of the AUD/CAD Forex pair. This created a nice short trading opportunity on the chart. However, things did not develop exactly as planned and I did an early exit from the trade.
Signals of the Bearish Trend Bounce
- The price bounces again from a 3-times tested bearish trend.
- This would be the fourth bounce from the trend.
- The trend looks like a reliable resistance level.
- The bounce is relatively sharp and breaks the support area of the consolidation under the trend.
Stop Loss and Target of the Trade
I placed a Stop Loss order above the bearish trend line taking into consideration the previous top at the bearish trend. However, the Stop was still too loose because I was unable to put it exactly where I wanted. But this is not a problem as long as you observe your trades. A Stop Loss order is not meant to be hit. It is there to protect you from volatile price fluctuations. If you see that the price action performs not as expected, simply close your trade without waiting for an interaction with the Stop Loss order.
There is not certain target in this trade. The thing I can tell is that my intention was to trade on the assumption that the price will go below the lowest low of the trend.
Live Trading Example
See that the price initially hesitated at the trend line and even close few candles above. For this reason, decided to do an early exit from the trade and not to risk the already created profit. I exited my trade somewhere near the lowest point of the trade on the assumption that this is a strong support area.
Bottom line, I collected 23 pips with this trade, which equals to profit of 0.22% approximately. This is a good performance having in mind that this is a scalp trade.