Right, it's what Trader Vic calls a 2B pattern, or if you were around before Trader Vic, it's what you would call fading resistance. Trader Vic says after price makes higher high, to wait for price to reverse and close below the resistance line. Personally, I like to "anticipate". When I'm right, I can usually get a 4 or 5 tick "head start" on the guys waiting for "confirmation. I've noticed a lot of you are saying you wouldn't short there. It's really not a bad trade guys. I promised I wouldn't show the rest of the chart, but I will say this, the market does reverse "shortly" and head back down (a lot!) just as someone who fades resistance would expect.
Doesn't really matter whether you show the rest of the chart or not. Based on what you've provided, there's really no way of determining the proper course of action. Therefore, one must be prepared for either a breakout or a reversal. To determine that, it would help to know more about the level at which you'd plan to short.
But why a reversal at that particular point? The fact that it was reached once doesn't necessarily make it resistance. What if price were to break through that level instead? Would you be prepared, or would you just let the trade go? How would you distinguish between a breakout and a potential 2B? And so on. Not trying to be argumentative, but the reason why so many people so often end up on the wrong side of the trade is that, in their efforts to keep things simple, they ignore information that would put them in the right place at the right time.
You're making a number of assumptions that are not supported by the chart you've posted, perhaps because you have a context and the rest of us don't. You say, for example, that price is testing a recent high, but there's no way of determining that with this chart, any more than one can shoot a close-up of somebody's eyeball and ask that the photograph be identified. As to the second or third test, there's no way of knowing from this chart how many times this level has been tested, if it's been tested at all. As for hoping that the price doesn't break out, that's not what I'd called a fully-formed strategy. As for the "2B", there's more to it than is presented here. Is the price, for example, in an uptrend or a downtrend? If it's in a trend, has that trend been broken? This is a "simple" trade only because you're leaving so much out. Are there any elements that would improve your chances? I have no idea. You've cropped off so much that the trade becomes essentially a random one.
I thought you didn't want to be argumentative?...lol Okay, just forget it. You don't like the trade. That's cool...let's move on to something else.
I take trades like this often. If the price bounces and stalls I take quick profits. If the price bounces and drops, I try to ride it for some extra profits. If the price blows through, no big deal I would be stopped out and on to the next trade. Now if price stayed in the 892.50 area for several bars with no drop or bounce, then I would exit the trade and re-evaluate the situation. Chris
Okay, and if the trade does go your way,( drops quickly) you don't lower your stop to BE until you have about 8 ticks profit? That's something I've been struggling with. Lately, if I'm showing 4 ticks I'm lowering to BE, and of course I'm getting a lot of scratches. Somtimes I regret it, sometimes it was the right thing to do...