I had been waiting for this trade to set up and I had it in mind not to jump the gun but to wait for levels to hit.

But only R1 was touched and CBOL, y’day High and the fib remained untouched. I took the trade with a SL above those levels – but only just. And I decided that if this was stopped I would make a second attempt at the trade.

The PA straight into the level is steepening and therefore primed for a reversal. But only R1 hit, and makes sense to assume that there will be a lot of orders waiting at CBOL and y’days High and that the market will find it hard to resist getting to that level.

What mindset would I need to trade this? What were my options?

  • I could take the TL break to fade the level on the assumption that the PA is telling me a reversal is on cards and that the market has come close enough to the levels to make the trade make sense.
  • I could take the trade using a wider stop to make sure I didn’t get stopped out on a swift spike into CBOL, but doing this means that the trade has to work much harder to get 1:1 and more.
  • I could have taken a break of the stair step TL on the M3 chart (shown below).

The M3 chart shows that the market stair stepped up towards the level all morning. And since we are in weak bullish trend, a sustained break of the highs was very possible. One way to trade this was to take a break of the TL that supported the stair step upwards.
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