Acc Risk: 0.5%
Sell: 2x @ 1212.6
Stop: 2x @ 1221.6 (90 pips)
T1: 1x @ 1206.3 (96 pips, 1x R:R)
T2: 1x @ 1187 (256 pips, 2.6x R:R)
Saw this set up on Gold doing some back-testing. I doubt it will work out given the MACD divergence is a step down and the Daily and Weekly charts both have moving average targets nearby @ 1230. However, I’m trading the set ups I see, trusting in the probabilities from back-testing. Will post an update once I see what’s happened.
4H Chart – The Set up
Update #1 – 25 Jan
First target has been hit, second target still a way away but rising which is skewing the RR. The T1 ended up being a sub 1x RR. Something to test in future is whether it would be better to go for a static target such as the prior high/low?
One thing I have noticed is how the divergence is now setting up to go long. It’s a different kind of divergence to the pure DST divergences I’ve back-tested so I won’t trade it. But I suspect if we get a close back inside the bands there’s a reasonable chance the T2 won’t get hit.
Update #2 – 25 Jan
The candlestick didn’t close inside the bands and the second target got hit shortly after T1 was hit, with a nice move down. Ended up being a 196 pip move (2.1x RR trade). Not bad, I’m quite lucky really that price did move down to my target relatively quickly, given the MA was creeping up.
I spent most of the time thinking this wouldn’t really work out, so I’m glad I ignored my inner doubt 🙂 The trade was actually a pretty clean trade in the end. I think if the higher timeframes had been aligned I would’ve been happier to take the trade.
My position size was really small and I’m frustrated that it didn’t really win me much considering it was a few hundred pips. Next time I think I’ll up it to 1%.
Looking at the chart now, Gold found support at 1180 and it looks to me like it could set up for a retest with divergence to go long at 1170-1180, we’ll see. (That would coincide with the lower band on the weekly chart.)