Some people requested that I write down all my thought throughout a trade step by step. I will try to do that.
Fist I check currency pairs for strong trend. I log into my ForexTrendy account and quickly scan for best trending pairs. (You can use other methods to determine trending pairs if you want.) Most pairs were undecided in terms of clear trend, so I picked the best one. On USD/CAD most arrows were green and pointed up as you can see on the picture below. So this is good enough uptrend to follow.
First few hours there was nothing particularly interesting going on. I only drew support and resistance lines as they formed.
Then price reached S/R area. This is where things might get interesting. It’s all about how price reacts to these areas.
When price is on S/R area and it doesn’t quickly break through, then it’s time to be alert and ready. This is where trade setups form.
If candle closes like on the picture above (the one the arrow points) I am ready to get in.
Let me explain why.
3 candles before current were big and strong blue candles going down fast. And when they reached support area – suddenly this weak yellow candle forms. It tells me that sellers are out of breath. (No more big blue candles). Now there is higher probability that reversal is in order. So I get in.
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