I wrote yesterday that, although I was holding a short, if RSI started climbing out of oversold and a bullish candle formed on the hourly chart, I’d consider a long. As I explained, there didn’t seem to be a strong direction but the Euro was resisting falling with momentum holding its own on the daily chart. Thus, if momentum on the short-term chart fell into line with that on the longer term chart, I’d want to be in that direction. This is exactly what happened on the hourly chart.
Euro dropped to a low of 1.4808, just below the support level it’s been holding on prior drops. The fact that it dipped just below is telling, though. It might drop lower the next time down. Regardless, the hourly candle closed at 1.4829 with RSI oversold at 20.90. I stayed in my short because I had no other clues to work from. The next candle closed at 1.4846 with RSI staying oversold but rising to 28.57. To say the pair had my attention is understating the case. Then, the third candle closed at 1.4856 and RSI was out of oversold at 32.74. This was what I was watching for. Clearly, the drop was over for now. I closed my short at 1.4854 (profit of 107 pips) and bought at 1.4864. Obviously, I’m profit stopped at this time since it climbed from there.
Let’s see where it goes. The place where it tops out this time should be informative. I will be ready to short again because the overall direction is unclear. Might as well grab some pips where they are. Here’s the hourly chart:
© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.