On the H1 chart, the price which is moving lower has created a bearish trend pattern in the form of three lower highs, lower lows which we may consider as evidence of bearish pressure. Generally, after a bearish trend pattern, we may expect corrections and then further continuation lower. Currently it looks like a correction is happening and also based on the Stochastic Oscillator we could see that the price has reached it’s extreme which we may consider as another evidence of bearish pressure. In addition to this, currently there are no signs opposing this short term bearish view here as well. Also, we had two strong support zones that has formed and the price which is moving lower has broken below these zones and is holding below them, we may consider this as yet another evidence of bearish pressure. Currently, these strong support zones are acting as strong resistance zones for us. Until these two strong resistance zones (marked in red) shown in the image below hold my short term view remains bearish here and I expect the price to move lower further.

 

So, traders, this is why I wanted to show this example to help you understand why we should always trade based on the facts and hints provided by the market and take the right actions according to that. Even though we had various facts supporting the bearish view here, the price didn’t hold in the two resistance zones as I expected it to and broke above them, which is a contradictory sign provided by the market opposing the bearish view. Also, you should keep in mind that losses are part of trading we can’t expect every trade to go as per our plan and provide us profits. In trading, we can’t avoid losses but in order to be successful in trading, we should know how to cut losses early and how to manage the trade when the price goes in the opposite direction.

Note: You can watch the webinar on how to cut losses early here

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If you have any further questions, don’t hesitate to drop a comment below!

 

Happy Trading!

Arvinth Akash
Home Trader Club Team.