Trade Idea: Short setup in XAUUSD in case of a bearish scenario.
In every new post, I always like to explain that my views are not a statement of "This will happen." Instead, my posts should be interpreted as "We never know what direction the price will take" However if the price movement becomes bearish, this is how I will trade the market.
Another important element to highlight is that my setups have a 50% win rate. That means that over 30 setups, I have 15 stop losses. So how do I make money if half of the time I'm wrong? The answer is: "Thanks to Risk to reward ratios." So, my win rate is 50%; however, when I win, I make 2 times what I'm risking on average. And that's the key.
You must be prepared to see deviations from the average. For example, on a strategy with a 50% win rate, you will sometimes observe 6 or 7 consecutive stop losses. That's called Standard deviation (but we will speak about that in another post).
This long introduction is made to develop a realistic view of a setup or a strategy and, in this case, my strategy.
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Bearish Technical Perspective:
a) The price had been moving in a range since the top in August 2020.
b) 1 year later, in August 2021, we observed the beginning of a new bullish trend defined by the white ascending trendline
c) Almost 300 days later, the price broke that trendline, and we observed a corrective formation. (A pullback)
d) I never trade a structure without having a clear pattern. In this case, I see the ABC pattern.
e) Another important element is that I never take a setup that I can not prove that the same concept worked in the past with the same or similar context. (Like this scenario in 2013)(It's important that you look for more than one scenario)
QUESTION: Is this a guarantee that the setup will be successful?
ANSWER: NO, it's not guaranteed. Let's take a second to speak about a good principle in trading. You can find evidence that something should evolve in a certain way; you can see a perfect scenario, literally a 10/10, and still have a stop loss. You are working with statistics. But don't get disappointed; if you only focus on 10/10 setups, you will see over a good sample that there's a clear edge.
Final details about the setup: I'm risking 3% of my capital on the stop loss and aiming to make 6% in case of a take profit. The setup duration is expected to be 30 to 45 days if everything goes as planned.
If I have a stop loss, that's it. So let your stop-loss gently take you out of the market.
If the order is not executed and we observe bullish movements, I will change my perspective to trade long.
Thanks for reading!
Another important element to highlight is that my setups have a 50% win rate. That means that over 30 setups, I have 15 stop losses. So how do I make money if half of the time I'm wrong? The answer is: "Thanks to Risk to reward ratios." So, my win rate is 50%; however, when I win, I make 2 times what I'm risking on average. And that's the key.
You must be prepared to see deviations from the average. For example, on a strategy with a 50% win rate, you will sometimes observe 6 or 7 consecutive stop losses. That's called Standard deviation (but we will speak about that in another post).
This long introduction is made to develop a realistic view of a setup or a strategy and, in this case, my strategy.
--------------------------------------------------------------------------------------------
Bearish Technical Perspective:
a) The price had been moving in a range since the top in August 2020.
b) 1 year later, in August 2021, we observed the beginning of a new bullish trend defined by the white ascending trendline
c) Almost 300 days later, the price broke that trendline, and we observed a corrective formation. (A pullback)
d) I never trade a structure without having a clear pattern. In this case, I see the ABC pattern.
e) Another important element is that I never take a setup that I can not prove that the same concept worked in the past with the same or similar context. (Like this scenario in 2013)(It's important that you look for more than one scenario)
QUESTION: Is this a guarantee that the setup will be successful?
ANSWER: NO, it's not guaranteed. Let's take a second to speak about a good principle in trading. You can find evidence that something should evolve in a certain way; you can see a perfect scenario, literally a 10/10, and still have a stop loss. You are working with statistics. But don't get disappointed; if you only focus on 10/10 setups, you will see over a good sample that there's a clear edge.
Final details about the setup: I'm risking 3% of my capital on the stop loss and aiming to make 6% in case of a take profit. The setup duration is expected to be 30 to 45 days if everything goes as planned.
If I have a stop loss, that's it. So let your stop-loss gently take you out of the market.
If the order is not executed and we observe bullish movements, I will change my perspective to trade long.
Thanks for reading!
Trade closed manually:
I traded this setup on futures (MGC), and the price has already reached the target. Final Risk to reward ratio 2