Hi traders, today I breakdown the price action on EU from an institutional perspective. Recall EU has been in a longterm downtrend for quite a while now. Therefore the highest probability setups will be found when shorting this currency pair.
Notice how the high created on April 21st just peaks above the old high of April 14 and then returns into the range. Smart money concept traders call this a stop hunt. It triggers buy side orders, giving institutions the liquidity they need to load on their shorts. Whenever we see this price action, the institutional trader immediately looks for the bearish candle which initiated the move (the red candle before the bullish momentum). This bearish candle is referred to as the ICT breaker block (represented by the lower red rectangle on the chart). There is also a second breaker block (represented by the upper red rectangle) but this one is seen clearer on the 4H chart.
When trading the bearish breaker block we wait until price convincingly breaks below the block's low (this occurred on April 22nd) we then short the market whenever price returns to the close of the BB. As shown in the chart, I was able to short EU on a sell limit order at 1.0825 (banks trade at rounded numbers and 5 levels e.g 1.0820, 1.0825, 1.0830, 1.0835 etc. so my entries are always rounded to the nearest 5 or 0 level). My stop loss was placed above the high of the 4H bearish breaker. Why ? well if price violates this level I no longer want to be in the trade as the market would be showing a willingness to go higher. My targets were set at the lows of April 14th and April 19th. Represented on the chart by ssl (sell side liquidity) since banks would use this type of liquidity to take profits, buying back the pair since they shorted it (remember to take profits from a short position you have to buy back the asset).
I did not manage to get full targets on this trade given it was Friday and I never hold trades over the weekend. I closed half of the position as price dipped into the ssl and the remaining portion I closed 1 hour before market close on Friday.
Thanks for reading and may the markets be with you.
Notice how the high created on April 21st just peaks above the old high of April 14 and then returns into the range. Smart money concept traders call this a stop hunt. It triggers buy side orders, giving institutions the liquidity they need to load on their shorts. Whenever we see this price action, the institutional trader immediately looks for the bearish candle which initiated the move (the red candle before the bullish momentum). This bearish candle is referred to as the ICT breaker block (represented by the lower red rectangle on the chart). There is also a second breaker block (represented by the upper red rectangle) but this one is seen clearer on the 4H chart.
When trading the bearish breaker block we wait until price convincingly breaks below the block's low (this occurred on April 22nd) we then short the market whenever price returns to the close of the BB. As shown in the chart, I was able to short EU on a sell limit order at 1.0825 (banks trade at rounded numbers and 5 levels e.g 1.0820, 1.0825, 1.0830, 1.0835 etc. so my entries are always rounded to the nearest 5 or 0 level). My stop loss was placed above the high of the 4H bearish breaker. Why ? well if price violates this level I no longer want to be in the trade as the market would be showing a willingness to go higher. My targets were set at the lows of April 14th and April 19th. Represented on the chart by ssl (sell side liquidity) since banks would use this type of liquidity to take profits, buying back the pair since they shorted it (remember to take profits from a short position you have to buy back the asset).
I did not manage to get full targets on this trade given it was Friday and I never hold trades over the weekend. I closed half of the position as price dipped into the ssl and the remaining portion I closed 1 hour before market close on Friday.
Thanks for reading and may the markets be with you.
