I’ve had a few consecutive winners, so I was probably due a loss and today it happened!
The trade was a long from a 30 min EURUSD demand zone. Price spiked the zone by 2 pips and I was stopped out for -10 pips. The market then proceeded to go up in my chosen direction to the first small supply zone (marked in yellow).
The zone can be seen more clearly on this 15 min chart:
This trade would have worked with a slightly wider stop, but I employ strict risk management and I am not prepared to widen my stop. As professional traders, we treat losses as a cost of doing business.
Another point I’d like to draw to your attention, is at the same time that the Euro set up, the NZDUSD and GBPUSD pairs also bounced off demand. The former bouncing from a 30 minute zone and the latter front-running a 15 min zone by a couple of pips.
Often, the market will bounce off a higher timeframe zone first and then make a second test deeper. I always prefer a “fresh” zone against a retest, where I will enter at the level. On second tests I like to see what price action does first, such as my favourite bear or bull trap.
As always, trading is a mix of art and science. The best we can do is run with the probabilities and employ good risk management.
I hope this article has been helpful!