The rule is pretty simple: if you have many technical confluences backing your setup, the probability of your trade succeeding is really high. On the illustrated BTC chart, a number of confluences is listed. To be precise, there are 4 confluences examined, and they will be all scrutinized below:
1) The current direction of the market is bearish, meaning we are in a downtrend. As a rule of thumb, in a bearish market we look for SELL positions rather than going long (fading the short-term trade against the long-term trend).
2) A nice descending triangle pattern has been formed, indicating that a bearish breakout is highly possible, and that the price may keep dropping deeper down.
3) 60 EMA perfectly lines up with the upper boundary of the descending triangle, which is a crucial zone of resistance that the price can’t seem to penetrate.
4) A nice bearish engulfing candlestick pattern was formed before the massive drop happened, which serves as another indicator of bearish pressure.
After having all confluences ready in hand, it is time to execute. The Stop Loss is place a few pips above the zone of resistance, and the Target Profit is set at 3% gains, as the risk-to-reward based method is utilised.
NOTE: Even though having multiple confluences backs up your technical setup, gives you confidence, and provides your graphical setup with a higher chance of succeeding, risk-to-reward principles should be strictly followed in all cases! We cannot control the market, but we can control our capital, risk, and emotions.
Have a great upcoming weekend, everyone!
1) The current direction of the market is bearish, meaning we are in a downtrend. As a rule of thumb, in a bearish market we look for SELL positions rather than going long (fading the short-term trade against the long-term trend).
2) A nice descending triangle pattern has been formed, indicating that a bearish breakout is highly possible, and that the price may keep dropping deeper down.
3) 60 EMA perfectly lines up with the upper boundary of the descending triangle, which is a crucial zone of resistance that the price can’t seem to penetrate.
4) A nice bearish engulfing candlestick pattern was formed before the massive drop happened, which serves as another indicator of bearish pressure.
After having all confluences ready in hand, it is time to execute. The Stop Loss is place a few pips above the zone of resistance, and the Target Profit is set at 3% gains, as the risk-to-reward based method is utilised.
NOTE: Even though having multiple confluences backs up your technical setup, gives you confidence, and provides your graphical setup with a higher chance of succeeding, risk-to-reward principles should be strictly followed in all cases! We cannot control the market, but we can control our capital, risk, and emotions.
Have a great upcoming weekend, everyone!