This morning I tweeted that I had shorted the “Kiwi” (NZDUSD) pair, so I thought I’d write a quick note to explain my trade.
The green line was my entry and the red lines are my stop and potential target. I actually closed the trade for a 20 pip profit as there were tell-tale signs it was reversing.
At first, it’s not very clear why I saw supply on the 1hr chart, so lets move down to the 5 min. Here you can see the supply zone very clearly. I have also shown the reason why I exited and was happy with my profit… because price spiked support (in blue) into demand (not marked) and promptly turned. My only regret was not entering the trade exactly at the level, as this would have provided better risk/reward.
There are a number of reasons why I considered this a high probability trade:
The flagging pattern into the zone (known as compression), the spike into supply that would have wrong-footed the bulls, and the trendline break that confirmed the trade I had already entered.
These are topics for another day, but for now be aware that everything I do is always based around institutional supply and demand!