The GBPUSD uptrend slowed down yesterday and the price failed three times to clear the 1.29x area. In the asia session the price came down to 1.284x. That was the price level of interest for me when the London session started.
The plan was to go short when the price stays below and long when the price get's comes trades abck to 1.284x and gets rejected from there.
At the beginning of the London session neither buyers or sellers could take control. At first it was locking better for the buyers (higher highs) but then the price rolled over and dropped quickly. At 1.284x the party was over and the price came back all the way back to 1.2865x. The price got rejected the first time but came back quickly. The ProFx oscillator turned to the upside and I went long with a risk of 3 pips. Potential upside, at least 10 pips or more.
Why do such setup work:
1) The primary trend is still up.
2) The price dropped quickly before and that usually means lots of traders chased the price down. Lots of traders are trapped and there stops will be at or above the last swing high.
3) The price got first rejected but traded back to 1.2865x very quickly. That's a very bullish sign and it took not much to push the price to the upside.
4) Once the level was cleared a chain reaction started. Momentum traders went long and those who went short earlier got stopped out.
Does it always work?
No, nothing works always when it comes to trading. The price could have been rejected from 1.2865x. That's why it is so important to have a plan for all scenarios you can think about because you will find that it is much more likely that you will make costly mistakes when you find yourself in a situation you did not think about before.
At least that is my personal experience.
Up we go!
At some point it became clear that the price will not go down. I went long and expected significant follow through momentum and though the trade looked promising the momentum faded away quickly. I closed my long (see M1 screenshot), the price went down, came back up again and started a field trip to the upside from there. Unfortunately without me.
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