In this post, we are going to make a detailed analysis of our latest swing trade in which we are right now 1100 pips in profit after around a period of 20 days. This swing trade was opened on 18th June and did not take more than 30 minutes daily to monitor. Right now it is 1100 pips in profit. In this post, you will also learn how to pyramid your position with low risk. So let’s analyze this swing trade in detail. Take a look at the following screenshot on the weekly timeframe.
Now weekly timeframe is a very important timeframe that tells you a lot about the major moves developing the market. Make it a practice to regularly check the weekly timeframe. This GBP/USD Weekly Chart is showing two things. One is the bearish divergence been shown by the Stochastic and the other is the price touching the 61.8% level and getting bounced off. It is a strong signal that we need to go short. So let’s confirm our analysis by looking at the lower timeframes. Take a look at the following daily timeframe chart.
Take a look at what is happening at just above the red the arrow. A hanging man candlestick reversal pattern is being shown. When a hanging man appears in an uptrend, it is a strong trend reversal signal. You should also observe a small bearish divergence being shown by the RSI this time. Both RSI and the Stochastic are overbought. Now take a look at the H4 timeframe. This is the main timeframe that we use to make the entry and the exit decisions. By looking at the weekly and the daily charts, we have a pretty good picture the market is turning and a downtrend will be starting soon.
As you can see the three indicators the MACD, RSI and the Stochastic are all showing bearish divergence. We wait for the two moving averages EMA10 (Red) and EMA34 (Aqua) to cross each other. Both the two EMAs cross each other pretty soon.
We entered just above the red arrow shown in the above screenshot. Before we made an entry, we checked on the H1 timeframe and found a nice bearish divergence signal been shown by the Stochastic meaning we should go short.
We entered the market at 1.56700. The stop loss is 100 pips at 1.57700. The market top is at 1.57517 so we are covered. We will enter a second short position if the price goes up and but doesn’t break the resistance at 1.57517. But the price didn’t go up, it shot down and we were 200 pips in profit next day. We continue in the trade as long as the two EMAs don’t cross each other on H4 timeframe. EMA10 (Red) tries to cross EMA34 (Aqua) below the second red arrow but found resistance there. We checked H1 timeframe and found the RSI showing bearish divergence meaning no need to close the trade. This is the ideal place to build a pyramid and open a second position. First move the stop on the first position to 1.5400 and then open a second position at 1.5300. Now your first position is profit of 270 pips. So even if you lose, you are going to be in profit of 170 pips. But as we have said above taking a look at the H1 timeframe shows a bearish divergence on H1 timeframe.
This was one day before the NFP report day on 5th July. Right now the price is at 1.49076 and we are now in a profit of 763 pips on the first position and 400 pips on the second position. So we are in a total profit of 1163 pips in around 20 days. Weekly timeframe is once again showing bullish divergence being formed. Take a look at the weekly timeframe once again.
Price has moved down to the 0% Fib Level. RSI, Stochastic and the MACD all three are showing bullish divergence being formed. Price will go below the 0% Fib Level in our assessment and once it does we will close both the short positions. How much time did it take us monitor the swing trade.Not more than 30-60 minutes daily.
Price did cross the 0.0% Fibonacci level and found support at 1.48125. The trade was closed at 1.48319 which was 0.0% Fibonacci level. The total profit was 857 pips for the first position and 468 pips for the second position. The total profit was 1325 pips. This post illustrates how you can multiply your profit by building a pyramid when the trend is going strong. A good pyramid is one in which the first position is made risk free first before the second position is opened. In the above trade, you might have observed that when we opened the second position, the first position was already in a profit of 270 pips. We had moved the stop loss so that even if the market had moved against the second position we would have ended up with a profit of 170 pips.