One of the biggest secrets to successful trading is that your trade idea only needs to be right enough for you to make money.
Two weeks ago, I said I thought the euro had further upside and we rallied nearly 400 pips. Today we are down nearly 250 pips since last week when I recommended looking for short term shorts. One need not have been in these entire moves to have made money.
MAKING CHOICES
And here’s why: We didn’t know that the euro was going to continue to rally or that it was going to top to within pips of my last week’s chart. We made an educated guess or we “speculated” based on price action, price levels and some fundamental analysis. So where are we going from here?
PATTERN ANALYSIS
Flags: For waving or trading?
Now, it looks like the euro is consolidating into a daily bull flag. The problem with bull flags is they look great on the chart until they turn into a downtrend.
THE $64,000 QUESTION
Which will it be: Long or Short?
The short answer is we never actually “know” which if the market will go long or short. This trade is no different. On the daily chart we have our bull flag, but we also have a very bearish daily candle developing. If we close the day near these lows, we will likely see further downside.
IDENTIFY A TARGET
But downside to where? Putting a Fibonacci retracement from this most recent swing low to high, we see support coming in at 1.2769 and 1.2593 with minor support coming in at 1.2814 / around the 200 day ma. I don’t know which one, if any, of these levels will hold, but like my headline says, I only need my trade idea to be good enough for me to make money.
Or in trading terms, our bull flag may give us new highs, or it may be a new downtrend developing. Either way, these levels should give us enough bounce to make some pips off of. Or to the downside, if this current daily bottom breaks out, they will give us targets to trade towards on the short side.
Looking for more trading ideas? Read our daily Markets section here.
