I opened a short trade on the USDHF pair about an hour before the markets closed.
Not the greatest idea to do so. Taking a look at today's commitments of traders (COT) report revealed a massive short position held by non-commercial traders. Clearly the long term sentiment is still bullish for this pair. So far, market closed down 78 ticks in profit for my trade. I doubt the take profit will hit. Instead, I am looking for a gap down on Monday's open somewhere on or just near the trend line. Now that we have established that the US Dollar remains relatively strong, why then is a short signal generated?
This is a counter trend trade. The objective here is to close this trade out at a profit as the market makes a corrective move. This is much better explained on the 4-hour chart.
As the uptrend accelerates, it is bound for a correction. We are here to trade the correction. The great thing about the Forex market is we can make money on either side of the trade. Although this pair is trending, the sudden surge upwards is unsustainable. The market is already experiencing buyers and then suddenly it faces another massive wave of buyers. Eventually what happens? Eventually there will be no more buyers and so price will stall. We actually see this happening as price struggled to push higher. In the last couple of bars, you see bearish candlesticks completely engulfing the bullish candlesticks. Several bullish candlesticks are covered up by one to two bearish candlesticks. Therefore, we are looking to trade on this correction. Generally, we can expect the price to fall to the original trend line before experiencing moderate buying.
