Daily Chart of AUD/USD
[B]Long or Short:[/B] Short
[B]Entry Point:[/B] Short at 1.0750
[B]Stop loss:[/B] 1.0850
[B]Profit Target:[/B] 1.0400
[B]Risk Percentage:[/B] 1.0%
[B]Reward-to-risk Ratio:[/B] 3.5:1
[B]Tools used:[/B] Bollinger Bands (20, SD 1 and 2)
[B]Trade Rationale:[/B]
This trade idea is “inspired” by my Bollinger Extreme System. After doing some reading, I think that I’m not using the appropriate bollinger band parameters. So instead, I’m gonna give the “normal” settings a try. I’ve gone with the normal SD 1 and 2 on 20 day bollinger bands based on the daily chart. I think that we could be seeing a top on AUDUSD soon, as the pair is now sitting in between SD 1 and SD 2. I’m just waiting for today’s close to see how the candle closes and whether it closes above or below key resistance around 1.0750. If it holds, I will short around that price.
Take note that my system is basically a contrarian one and it needs a lot of work. Nevertheless, I like trying to pick tops and bottoms and I feel that this setup provides a decent reward/risk ratio of 3.5 to 1, as I’ll be aiming for the recent lows around 1.0400 and will be going with a stop loss of 100 pips.
[B]Trade Adjustment:[/B]
Based on my observations in the past, the middle moving average tends to hold as a resistance or support level. If it looks like the orange line is holding, I will take profit early.