Here’s a case study for trading the EURUSD End Of Day.
The EURUSD has hit into monthly resistance levels that were outlined much earlier in previous posts.
Would it continue to run, or turn round and head back down?
Trying to pick tops and bottoms is tricky business. Especially in currencies where markets tend to trend far longer than we expect them to.
Reading Price Action on Charts
Chart Trading is about reading the chart and understanding price action, because the chart is simply telling us a story about the emotions, psychology and actions of the market participants.
Drilling down to the Daily Charts for the EURUSD, this is what I see:
There are two ways to trade this:
- To Sell Short on the break of the neckline, with a stop loss above the Right Shoulder
- To Sell on a break below the low of day on 2007.12.12 (Right Shoulder) which is an Inside Bar
But which option should I take?
Here’s where additional analysis comes into play to see if other factors weigh in favor of the trade.
There is a bearish divergence on the MACD, and we know that we have hit strong resistance levels on the monthly chart. Although we’re trading above it, there is also the possibility that the EURUSD could trade back and test it, or maybe even go below it.
Trading Successfully Is More Than The Entry
Either one of these two possible trade entries could work out. Or both may not. As it is, this is what happened:
In either case, entering the trade is the first step of a trading plan. It’s how you get out that makes the difference between a winning and losing trade.
For the EURUSD, the trade was taken on a break below the Inside Bar day on 2007.12.12. Half the position has already been exited (making it a risk-free trade), and the remaining half will be exited based on trailing stops.
Trading can seem so easy, but it takes a long time to learn the basics and details of the market. From candlesticks, price patterns, support/resistance levels, trade and money management strategies and tactics. There are so many variations to trading, and for the right trader, the right combination can make trading seem so simple and easy.
A strong part of discretionary trading includes learning as much about yourself as possible. Are you a swing trader? A trend trader? An end of day trader? An intraday trader? What are your resources available? And many other questions.
It can seem like a never ending series of questions to answer, and it can seem to take a long time. And how do you know what you are, or what you’re not, if you haven’t tried it out?
The learning of trading is in the journey. The experience that you gain, the strategies, tactics and insights into market and self behavior can’t be learnt overnight. That’s why, if you ask most successful traders, they will tell you they learnt how to trade the “hard” way.
If you’re fortunate, you may stumble onto the right mix at the beginning, and gone on to learn even more strategies and tactics for trading.
To be a Successful Trader?
It’s about long term success, not short term riches, that will eventually matter most to your trading account. So, if you ask me, I think new traders should probably trade on paper longer than they think they should. At least until they have a track record of relative success that gives them a certain degree of confidence to start trading live.
And my personal opinion is that intraday trading is a lot more difficult that most people make it out to be. But that’s also where a trader can learn the hardest lessons the fastest. 
So who’s to say which methodology and approach is right or wrong?
That decision, I feel, is ultimately left to the individual trader to make.