I was trading this in the wrong direction as it turned out, and the higher-high in the screenshot was the clue to that. But using this position-building strategy, I still came out with two profitable trades.
Even though these were sells and counter to the short-term trend, they were in line the long-term trend and the market gave a lovely reversal trade later on in the session.
If I am trading levels – in the case the pivot, y’day close, the 169 and H4/H1 TLs – and I think the market may reverse but the P in front of me is ranging, with lots action around KLs, I can trade it as follows:
- I can sell each reversal setup and then take 70% profits at 1:1 RR, leaving 30% of the position open, ready for a trending move.
- Once I have taken 70% off the first position, its minimum outcome is +0.5R, so I can then open a second position and use the same TP strategy.
- When the market is gradually working its way down to form a new trend, this a great way of building a large position while never risking more than 1R at a time.
- An alternative way to do it is to set stop to entry once the trade hits 1:1; this gives you a guaranteed 0.7R — if the market continues to range it is highly likely that the last 30% of each trade will be stopped.
In the example above, the new high did not stop me taking the trade because we were at a level on confluence and until that broke, shorts were still valid for me — definitely not trades to hang around in with full risk.
