I’ve recently started trading live with 200GBP in a micro-account, trading lots of size 0.05 units. My method so far has been the following:
[li]Identify the current trend direction on the H4 chart. Trade only in the direction of this trend.
[/li][li]Switch to the H1 timeframe and wait for a retracement on this trend.
[/li][li]Identify an area of supply/demand at this level, at which the main trend may resume.
[/li][li]Use price action (candlestick and pattern recognition) to see whether this level holds, and enter in direction of main trend if it does.
The first main problem with this method is that it seems to give off very few signals. This means that when a signal is given, the trading opportunity must be high probability, to make it worthwhile. However, I’ve not found much success with this method. For example, I made the following short trade of GBP/USD today, based on this method:
[li]Bearish trend on the H4 timeframe - looking for a short trade.
[li]On the H1 timeframe, we can see an increase (retracement) in price.
[li]There apears to be an area of supply (resistance), indicated by the blue rectangle.
[/li][li]Within this rectangle, a doji formed, indicating a potential reversal of this short term uptrend, so I expected the current trend to resume.
I also noticed that the bodies of the 4 bullish candles (on the H4 chart) before the Doji, were getting smaller and smaller, suggesting decreasing upward momentum. Based on this, I entered my sell order just after the doji formed. After this however, price continued to increase. Was my analysis good? If not, why not?