This trade setup is based on a bullish momentum confirmation, with the price positioned near a key psychological level and showing signs of a potential upward continuation.
2. Key Technical Indicators:
Momentum Power:
The momentum power is -0.12402500, indicating bearish sentiment. However, the chart suggests a potential reversal as the price approaches a key resistance level.
The momentum confirms the trade, but candlestick confirmation is required before entering.
Price Action:
The price is close to the 190.800 round level, which is a significant psychological level. A break above 190.919 would confirm bullish momentum.
The candlestick patterns show rejection of lower prices, with buyers stepping in near the support zone.
Moving Averages:
The price is below the 200-period moving average (green line), indicating a bearish trend. However, the recent price action suggests a potential retracement or reversal.
The moving average is sloping downward, but the price is attempting to break higher.
Support and Resistance Levels:
Support: The support level at 189.288 (SL) is well-placed below recent lows, allowing room for minor retracements.
Resistance: The resistance level at 191.902 (TP) aligns with previous price action and a potential supply zone.
Risk: The distance between the Buy Stop and the Stop Loss is 163.1 pips (190.919 – 189.288).
Reward: The distance between the Buy Stop and the Take Profit is 98.3 pips (191.902 – 190.919).
Risk-to-Reward Ratio: Approximately 1:0.60. While the risk-to-reward ratio is not ideal, the trade is valid due to the potential for a bullish breakout.
4. Trade Justification:
Bullish Momentum:
The price action near the 190.800 round level suggests a strong likelihood of a bullish breakout.
The chart indicates a long trade confirmation, aligning with the buy stop order.
Trend Alignment:
While the price is below the 200-period moving average, the candlestick patterns and support levels suggest a potential reversal or retracement.
Logical Stop Loss and Take Profit:
The Stop Loss is placed below the recent support level, allowing for minor retracements without invalidating the trade.
The Take Profit is placed at a logical resistance level, ensuring a realistic target.
5. Potential Risks:
False Breakout: If the price fails to sustain above 190.919, the trade could be invalidated.
Market Volatility: Sudden news or events could cause unexpected price movements.
6. Educational Takeaways:
Candlestick Confirmation:
Always wait for candlestick confirmation before entering a trade, especially when momentum is not strongly aligned with the trade direction.
Risk-to-Reward Ratio:
Ideally, aim for a risk-to-reward ratio of at least 1:1. In this case, the ratio is slightly below ideal, so consider adjusting the TP or SL to improve it.
Trend and Momentum:
While the price is below the 200-period moving average, the trade setup suggests a potential reversal. Be cautious when trading against the prevailing trend.
Stop Loss (SL): 189.288 (below recent support to allow for retracements).
Take Profit (TP): 191.902 (at a logical resistance level).
This trade setup aligns with the potential for a bullish reversal, offering an opportunity to profit from a retracement or continuation of the upward move. However, the risk-to-reward ratio and momentum should be carefully considered before execution.
Recommended Lot Size
Trading is all about statistics.
While we can experience winning streaks, we can also suffer from losing streaks.
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