Here's an example of a rarely occurring setup on the GBPUSD,H1 chart (see below).
On the H1 chart, note the strong rejection candle, and the fact that price then retraces back into the top third of the candle. Of course (at the time) we don't know where the top of this subsequent candle will be, but anywhere in the top 20%-40% of the previous candle represents an excellent low risk entry (by placing your stoploss just outside the high point of the strong rejection candle).
Use the S/R on the D1 chart to establish potential return. There is a clear run back to the lowest magenta line, back as far as April. This gives about a 4:1 RR trade. For those who advocate RR (I'm pretty much neutral on this topic), and S/R, that represents a great countermove trading opportunity.
There are definitely risks involved in taking countermove trades, but the high potential RR, strong rejection from overboughtness, no intervening support for several weeks, and the fact that the GBPUSD had already exceeded its average daily move could be presented as arguments in favor. An interesting setup for the brave.
(I realize that for those who eschew countermove trading, this is a complete heresy.)
Anyway, I didn't take the trade, because I'm already long in GBPUSD, trialling another system.
David
On the H1 chart, note the strong rejection candle, and the fact that price then retraces back into the top third of the candle. Of course (at the time) we don't know where the top of this subsequent candle will be, but anywhere in the top 20%-40% of the previous candle represents an excellent low risk entry (by placing your stoploss just outside the high point of the strong rejection candle).
Use the S/R on the D1 chart to establish potential return. There is a clear run back to the lowest magenta line, back as far as April. This gives about a 4:1 RR trade. For those who advocate RR (I'm pretty much neutral on this topic), and S/R, that represents a great countermove trading opportunity.
There are definitely risks involved in taking countermove trades, but the high potential RR, strong rejection from overboughtness, no intervening support for several weeks, and the fact that the GBPUSD had already exceeded its average daily move could be presented as arguments in favor. An interesting setup for the brave.
(I realize that for those who eschew countermove trading, this is a complete heresy.)
Anyway, I didn't take the trade, because I'm already long in GBPUSD, trialling another system.
David
