Recently we can witness the market structure change. A lot of the failed chart patterns, a lot of reversals, a lot of the ranges. Look for example the recent price action in the GBP/USD. After the pair was based, there was an upside break and uptrend correction started. The price action although, on an uptrend swing is not reaching any known horizontal resistance and then is pulling back forming volatile daily swing candles. So the usual trading based on a daily close is excluded because you would be stopped out of your both trades long and short. and the daily swing moves are within 150 pips not giving the best risk-reward.
The same applies to the EUR/USD as well. Volatile daily candles, deep candle shadows, which means that the stop losses, if you want to go long or short, are usually taken, of course, if you are applying usual money management rules. So, if you have placed the sell order after the bearish Doji formation, as shown on the graph, on the second candle, you can see the reversal higher, pin inside the bar, nothing unusual. But, after this pin bar, we have a long-tailed bearish candle which will take out your stop loss order, especially in the case that you have moved it to lower in expectation of a further downside continuation. After that notice that the EUR/USD is in a sideways price action, forming also the H&S formation, which later failed. Huge swings to be traded in consolidation after the 400 pips uptrend move, you could, but you were possible, not able to catch.
What does this mean? We need to reduce profit targets within the 150 pips and even 100 pips, and we have to go for intraday trading applying good trade management with stop losses and take profit targets adjustments. Look at the four hours EUR/USD example. After the uptrend swing when the instrument reached 1.19553 level we had a bearish price action and formation. To apply proper trading execution you would enter short at the close of the second candle, bearish shadow candle on the reaction of the mentioned level, placing a stop loss at 70% of that bearish candle and targeting 1.18678 level lower, previously broken horizontal upside resistance. The risk-reward was 0.96 stops were safe. Correction went deeper but than reversed to the upside again and if you didn’t take profit on a trade your trade would fail.
So swings are usual at the market but recently they are becoming very hard to trade. The market actually doesn’t care what do we think about it and how we see it, that is why we need to adjust to every market structure. If there is a clear trend, which now is not the case, medium-term trades based on a daily close are fruitful. When there is a range, swing intraday trading must apply, with the strict rules, risk-reward less than 1 and good trade management with precise execution!
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