I originally planned to not place any trades this week because Thanksgiving is going to be on this Friday. Folks will be on leave, and volume will drop in the markets, leading to increased volatility. But then I took at look at my Forex charts (GBPUSD).
A perfect trade setup turned up that made it hard to resist.
Observations On GBPUSD
- Price had moved above a previous top, shown by the yellow line, and started to pull back.
- The pullback wave was lower in volume compared to the breakout volume.
- The breakout wave volume was strong.
What I Was Waiting For
Now my bias for this chart was bullish. I'm waiting for a No Supply bar to appear in the pullback before entering a Long trade.
This happened when Bar A was shown.
- It was a down bar.
- It had lower volume the previous 2 bars.
Confirmation of the No Supply Bar
To avoid being faked out, it is important that the No Supply bar be confirmed. Only then will I enter a Long trade.
The bar after Bar A did not close above the high of Bar A, so it did not confirm Bar A as a No Supply bar.
The second bar after Bar A, shown here as Bar B, was a strong bullish bar that closed above the high of Bar A, thus confirming Bar A as a No Supply bar.
I typically allow up to 2-3 bars after a potential No Supply/Demand bar for confirmation.
After Bar B closed, price immediately went up a few pips above Bar B.
To go Long, a trade is usually placed a few pips above the confirming bar (B) and since price has already moved a few bars above, I placed a trade via a Market Order.
I had a feeling price would retrace slightly though to test the confirmation bar.
As expected, price went down to test the confirmation bar and orange line before heading back up towards the RDH, which was where I placed my Take Profit.
The initial Stop Loss was placed a few pips below the orange line.
Exiting the GBPUSD
I switched to M5 to manage the trade. Initially, I trailed price using a moving Stop Loss. After price had moved around 36 pips in my favor, I decided to close the trade manually.
The reason for closing the trade was that we had a longish bar on the M5, and if prices pulled back after this, my stop loss would be a little too far back for my liking if it gets taken out by the pull-back.
I'd rather close and take profit at 36 pips, which was 1+% return for the day.