Update On EURNZD Trade

Just to update the EURNZD order which I mentioned in the previous post. So price continued down and did not retrace enough for my entry. The original target has been hit so I've pulled my order. This actually happens very often. I find myself cancelling more than 70% of my orders because some criteria gets broken, but it is how it is. There are more than sufficient opportunities every week. Price is now in a strong D1 demand zone, so surprising as this sounds I'm going to start looking for a setup to go long. The criteria for this would be for a H1 supply zone to be absorbed/engulfed as a sign of bullishness. I'll then buy when price retraces back to the source of engulf. A lot of people will find it hard to buy after such a steep drop, but we should instead love such steep moves because the entire sharp move down is a liquidity gap (at least on the D1) which can be easily filled without trouble. Just look at the prior few steep moves up and down, notice how price subsequently moves from one end to the other quickly and easily? This is because there is no zone in between to stop the move, and we know that price moves from zone to zone. Besides, I'm not taking a blind entry, I'm waiting for a lower time frame supply zone to get engulfed as a sign that the bulls are interested in higher prices. Can it go wrong? Sure it can, but if it works out, I'm potentially entering based on a H1 demand zone with a D1 supply zone as my target. In the best case scenario that my trailing stop is never hit, the RR could be as high as 20:1 or more, depending on the width of the H1 entry demand zone.

EURNZD D1

Pending Sell On EURNZD H1

EURNZD H1

A nice short setup just occurred on EURNZD H1. Downtrend, demand engulfed, very distinct supply zone with strong departure (signifying a huge order imbalance there) for entry and clear S/R flip level for target. Just want to share what goes on in my mind with this concept of trading. We know that trading is a probability game and expectancy is what matters. This trade if successful would yield approx 3R. If I lose, I lose 1R. I only need to be right 25% of the time to break even. Do you think shorting such a nice supply zone in a downtrend with clear space below has at least a 25% chance of working out? If so, take the trade.

This is the way I'm approaching every single trade now, measuring the reward-risk vs the probability of the trade working out. With regards to the above setup, I would say it should have at least a 65-75% chance of being successful. There is no reason not to take the trade! I used to be very uncomfortable with limit orders and preferred to wait for candlestick confirmation. However I realized that while waiting for candlestick confirmation might result in a slightly better hit rate, it greatly reduces the reward-risk ratio of the trade and hence my overall expectancy, especially if the candle is a big ass one. However this is definitely an issue of preference as I do know some really good candlestick traders too.

The fact that price moves from zone to zone is one of the best kept secrets in trading. It gives confidence in entering at the point with the lowest risk and holding to the next opposing zone.

With regards to the above trade, I'll only cancel it if 1) Price doesn't trigger me and goes on to hit my target
2) Price starts making higher lows on the way to my entry, signifying a possible trend change 3) I'm not in the trade by NFP tomorrow. I don't trade before NFPs, and with the Syria issue looming I'll certainly prefer not to hold trades over the week end.