Introduction
Monday is often a difficult day to trade in my experience because there is often very little newsflow, and the currency pairs are slow to make their initial move for the week. For that reason I will often not enter any trades at all on the first day of the week.
Today was setting up to be the same old story because I wasn’t really seeing any potential set-ups that I liked, but then I spotted that the USD/CHF had been making a big move early on in the London session and was approaching a key monthly level.
One of my trading strategies is to scale into reversal trades when a market is extremely stretched in one direction and approaching one or more strong levels that are likely to act as resistance and potential turning points.
Trade Idea
The USD/CHF had already moved higher, hit another monthly level and reversed downwards during the overnight session, highlighting how well these levels are respected, and had fallen hard from a high of 0.9166 to a low of 0.9111.
So it had already exceeded it’s average daily trading range of 50 points by 8.30 AM (UK time), giving further weight to a likely reversal.
By placing an order to go long slightly lower down at 1 point above the monthly level of 0.9104, I thought that this would be a very high probability set-up, and was still prepared to enter a secondary long at a weekly level of 0.9089 if the price fell even more.
Sadly for me the price didn’t get down to either of these levels and I was left watching on from the sidelines as the price reversed at 0.9111 and then made a second low of 0.9110 before continuing to move higher during the rest of the morning.
Alternative Entry Point
In hindsight I should perhaps have entered when the bullish pin bar appeared (circled in the chart above) just above my preferred entry point because this is a good indication that the market is about to reverse, but I opted instead to wait for my optimal entry level to be hit.
Subsequently, I missed out on up to 80 points profit by not taking this alternative set-up.
Final Thoughts
Overall I’m not too disappointed at this missed opportunity because I don’t normally trade Mondays anyway, and this would just have been a bonus trade.
I can take satisfaction that the trade idea was correct. The price only needed to fall another 5 points to get me into my long position, but this happens all the time in forex trading.
There should hopefully be plenty more opportunities to make money during the rest of the week, particularly as we have more major news releases scheduled. These can help to create extremely stretched markets, and therefore high probability reversals at key weekly and monthly levels.
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