In yesterday’s post I reviewed an intraday forex trade that I took on AUDJPY and how I managed the trade when price action showed me that my short-term bias was incorrect.
Today I am expanding on that initial trade setup and how I was able to identify a new setup that supported my initial bullish bias of AUDJPY.
Technical Analysis Review
I showed you where I drew intraday resistance on the 5 minute chart. This area represents where bullish price action was rejected and supported my revised short-term bearish intraday price bias.
Fast forward several hours following my AUDJPY sell position and price has broken through AUDJPY and retested it as support. And if you’ve watched my previous videos then you already know that I frequently talk about the importance of learning how to identify levels of support and resistance. Learning this one skill can transform a trader’s results.
Price action then offered two excellent opportunities for traders to buy this pair as price rejected a move lower and continued upward.
I missed the two retests of support, but managed to buy AUDJPY on a pullback following China’s GDP q/y and Industrial Production y/y announcements.
For those of you who trade fibonacci retracements, notice how price retraced to the 38.2% level. (If you want to learn more about trading using fibonacci retracements here is a link to a video that I created on the topic.)
As price consolidated I drew a line on my chart to represent intraday support.
As long as price action continues to demonstrate bullish behavior then I will remain in my BUY position. However, if there is any indication that price is reversing to the downside then I will close my trade and wait for the next trade setup.
AUDJPY price action shifted downward after news on the US was released and Janet Yellen announced that economic conditions are “likely” to justify raising interest rates this year. Price action demonstrated that my intraday bullish bias was no longer valid, which provided sufficient evidence for me to exit my position.
Key Take Aways
- Rather than chase price I waited for a retracement before buying AUDJPY
- Identifying key levels of intraday support and resistance helped me to develop my directional bias and avoid being whipsawed.
- I maintained my directional bias until intra-day price action shifted.