It’s time to point out our first Smart Money Forex trade! Let’s take a look at a new chart, this time with the last few candles erased so the chart looks like it would if we were watching it live. I’ve already marked the S&R zones for you.
Remember those candles we learned about earlier? Our knowledge of Long Wicked Candles, combined with this S&R zone, show us a trading opportunity.
Can you see it? We have a Long Wicked Candle that has bounced off a S&R zone. These two things tell us that price is probably going to reverse and start going down!
As you can see, we were right… Price immediately reversed and dropped like a rock!
We’ll learn how figure profit targets later (and stoplosses), but for now what do you think we should do with this trade? Hold on to it in case it goes lower, or close it out? If you said close it out, you’re right! We have a Long Wicked Candle, an Inside Bar, and the price has bounced off the lower S&R zone. All those things mean the price is likely to reverse again. We’d better close this trade and bank our profits!
Or better yet, since we are seeing signs of another reversal, bank our profits and take a new trade in the opposite direction.
Let’s see what happened…
We were right again. The price reversed and moved back up to it’s previous level.
So is that the whole Smart Money method, just trading bounces off S&R zones? Not at all! You need to have a lot more tools in your toolbox. Let’s learn about another important one, the trend and the trendline.