DislikedWe have a possible pinbar on the daily EUR/GBP. Here is my thought process on paper as to whether this is a good trade candidate or not . Please let me know if this makes sense to you guys.
Pros:
1. Swing Low
2. O/C within Previous bar
3. Bounced off minor PPZ
4. At 50% FIB (10/20 to 12/30)
Cons:
1. O/C not in top 1/3 (close was 40% from top), making this more of an "indecision only" bar
2. Bar range is smaller than previous few bars, which were strongly bearish.
3. Would be running into another PPZ zone around 0.8800. To me this signals that...Ignored
Jig will do a chart better than me but here's a try...
So looking at my chart it's not a Pb first of all, but ignoring the shape let's bring into consideration the location..
Location test is an division of 2 things for me.
1) analysis of why the PA setup occured
2) Space a potential trade may have.
In the light of the first test, I look at my charts and find some interesting stuff. The 50 fib which you already pointed out and 2 sets of bar highs from history (both marked by the magenta dash) If you ask me fair enough if the bar shape is good.
Coming to the second part of location test is what helps me conclude that the trade would be a real mistaken one (has a probablity of failing) The answer is in my chart illustarted with the 3 yellow dashes.
For a moment I'd like you to ponder over this fact...
"Price only just broke out of a triple bottom, a level it tested three times and failed, now that it has broken it the fourth time do you want to believe it will want to pullback to the 0.88 level which gave the three lows??"
You are extremely smart if your answer is a "Yes", the question then is, a good daily trade should demand the break of this level this time to the upside. "Do you want to believe a retest will break the 0.88 level, and all the hell of resistance around it??"
If your answer is a "No" you once again prove to be a smart operator
To conclude make sure you also take note of a potential trade entry as per James rules. 10 pips above the high of the Pin Bar, see where it lies...
Regards,
Ghous.
I believe . . .