Nice clean 2.5% trade taken shorting the British Pound (GBP) against the Aussie dollar (AUD). Below is a brief breakdown of this trade and why I took it. This is a good example of full time frame analysis starting on the monthly and going down to the weekly, daily and finally the 1 hour chart.
First lets look at the monthly chart. Here we can see a previous monthly bearish candle. We can also see however an upwards trend line that price was approaching. I wanted to find a small short move if possible that could catch price continuing to fall and decelerate around that trend line.
Next we'll switch over to the weekly chart. Here we see the previous week formed a high test/doji candle, testing the weekly 50 ema and a downward sloping trend line. However, Stochastic RSI was in the lower range so a short play could be relatively small and brief. Remember, higher time frames are always king so any indication of over bought or over sold or deceleration on a higher frame will take precedent usually over anything in a smaller time frame below it.
Next we drill down in the daily chart. Here we can see a clear signal and a pretty ideal situation with several levels of confluence in our favor.
We have a large bearish engulfing bar. This bar formed bouncing right off the weekly trend line. Most likely buyers got trapped and easily taken out as the keen sellers waited for that trend line, quickly collapsing price below a daily trend line and the daily 50ema. For me, this is the confirmation of a trend change. There wasn't a huge amount of room between this candle and the upwards big weekly trend line as well as support level around 1.67. But a nice intraday pullback could give us that minimum 2:1 trade I usually look for.
Finally, as we settle on the 1H chart we can see how and when I entered. I entered after a test of the 1H 50ema, just below the 4H 50ema. Stop was above both of those and the daily trend line. Target was set for the weekly trend line and 1.67 area. The position was open for only around 36 hours.