As with all great trades, we require a trading plan. This is a perfect example of how to analyse, execute and manage your trade. See linked chart for the initial trade idea.
See below for a step by step guide on how we entered this trade and what we looked for.
Goodluck and trade safe!
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First step: Identification. You have to identify when a trade set up is coming. For this pair, we were waiting for the ascending wedge to break down. From this you can see that we had an impulsve break of the ascending wedge indicating that the trend is about to reverse. We also marked out an area of interest where price may come back to retest.
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Second step: Preparation. We now wait for price to retrace back to the area of interest. We should also attempt to draw a trendline on the smaller timeframe to allow us to monitor the correction and get ready for the next step, execution.
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Third Step: Execution. We now wait for the correction to break. Entry is on the break of the correction with stoploss just above the correction. We use the start of the correction as the first TP or a level to put our trade in breakeven. For this set up, the stoploss was only 30pips and first target was 106pips (Risk reward 3:5)
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FInal Step: Manging your trade. To manage your trade, you can use various techniques such as moving averages, trendlines or broken structure. For this pair, we could use a roughly drawn trendline and when price goes above the trendline, we can close out our positions.
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AUDCAD Update: Price broke bear flag and dropping. If you had followed steps 2,3 and 4 - you could've entered this!