How I Managed My USDCHF Short For An Easy Win

5 min read

Early this week (well, actually while making my watchlist this weekend), I spotted a very nice setup on the USDCHF 4H charts. It had all the characteristics of a solid reversal setup and I was waiting for for my entry criteria to be fulfilled:




On Tuesday, we got our solid bearish signal! A massive bearish engulfing bar was printed, so once I saw this, I got in. I actually managed to get a slightly better entry than the close of this bearish engulfing candle, but the idea is the same.


The purpose of this post is to give you a quick rundown on how I managed this trade and why I made the decisions I made. Let’s first have a look at how the chart is looking now:





The Entry


To get started: why did I actually take this trade? Well, multiple reasons, but let’s start with the beginning. First, we had a nice uptrend going from mid-October until around the end of October. This is how I like trends: clean swings, not too many spikes and sort of predictable behaviour. Yes, there are even nicer trends than this, but for the purpose of trading a reversal, this works just fine.


At some point, I could see RSI divergence. The price made a slightly higher high, while the RSI made a lower high. This is a clue towards making a case for a reversal, but not enough by its own. After all, the price was still making higher highs. However, my interest was triggered at this point.


Then, we see two spikes to the downside! It’s as if this pair really wanted to move lower, but there are still too many bulls at work to make this happen. I found this interesting as well but again, no lower lows were made or no significant support levels were broken, so I just observed.


The price kept on ranging until last week, when we saw this massive bearish bar, breaking the first support level (black horizontal line) I indicated on my chart! It bounced off the second support level, which I mapped on my chart because it previously acted as a resistance, before breaking through it. Remember, broken resistance levels often become support and this time was no different.




As with any entry, it’s important to have patience. There’s always more time than you think to get into a trade and all too often, we let our fear of missing out (or FOMO) dictate what we should do. Instead, we should just let the market come to us. We define what we want to see and if it doesn’t happen, we move on!


But this time, it did happen! I figured that it would be very likely that the price would temporarily retrace, so I wrote in our trade advisor outlook that I would wait until the price reached the support-turned-resistance level around 0.99700 and then wait for a bearish signal. That’s when the bearish engulfing bar got printed and around that time, I got into the trade.



The Trade Management


Now, you can see that initially, the price kept going sideways without showing too much intention of moving down again:


USDCHF sideways


That’s why, after the 3rd sideways candle, I decided to reduce my risk. The setup didn’t do what I expected it to do, so I minimised the chances of getting a full loss on this trade. Additionally, I have a trade management rule that very explicitly states that if nothing happens after x amount of doji-like candles, I have to reduce risk. I was just following my plan.


Always ask yourself if the price is doing what you expected it to do.

If it doesn’t, then get out or reduce your risk.


But lo and behold, the next candle found some bearish momentum again! Just as I reduced my risk because the trade didn’t do what I expected, I now increased my risk again to a full position. Number 1 is where I reduced my risk and 2 is the point where I added back to it:




I will regularly do this on trades that don’t do what I expect them to do. As traders, we shouldn’t be hoping that something happens and the number one priority of any trader is actually to preserve capital. We are risk managers first, traders second. Yes, I could’ve made a little bit more by not changing my position size. At the same time, I would’ve also exposed myself to more risk in the event that the price would’ve kept going up.



The Exit


Finally, we get to the exit. Let’s first have a look at why I chose this level as my profit target:


USDCHF profit


I defined a level on my chart that could potentially have functioned as a support zone. The reasoning for this is that during the rally, it had functioned as a resistance level first and support level second (after it was broken to the upside). When these resistance-turned-support (or support-turned-resistance) levels are revisited, we can often see a reaction. We got a reaction this time as well, but the price eventually managed to break it.



Letting Your Winners Run


One of the hardest things related to trading for me is to not touch a trade that has almost reached its profit target. In this case, I was very lucky to have the price barely touch my profit target and then retrace a bit, but I would’ve eventually hit my target anyway:




Could I have gotten more out of this trade in terms of my profit level? Yes. Am I disgruntled about this? No. It’s important to know that as traders, we’re always going to find things that, on first sight, could’ve gone better. It’s important, however, to just accept the results we see and not get carried away by “what if” scenarios. The time for that is during our strategy backtesting process, not the individual trades.


Do you have problems managing your trades? Let me know in the comments!



FX and futures trader, using price action, market profile and order flow to trade markets. I also have an interest in trading psychology and algorithmic trading. Follow me on Twitter: @GhostwireTrader