Exploiting the Same Price Level more than Once and Making the Most of Limited Opportunities

This article was originally contributed by the archived community member Mifune. We no longer maintain contact details for the original author. The content has been fact-checked and updated for accuracy by our editorial team.

August 25, 2014

Monday was one of those trading days where there’s a decent amount of movement, yet not much going in the way of actual trade set-ups. Pivot points weren’t a factor and it took a price level to manifest on its own from the price data to actually get something worth trading.

On the 6:40(AM EST) candle, price closed out around 1.3272. The next candle was bearish, while 1.3272 was rejected again on the 6:50 candle. So here we already had the basic footing of a resistance level in the market. A common question that traders have is what constitutes a “resistance level,” for example? Basically it can be as simple as a green/up candle followed by a red/down candle. Mainly, I’m just looking for how price acts around these levels – pivot points, high of day, low of day, any type of support or resistance created from previous price history – and, of course, how price acts on its own.

I addressed this matter in some detail in these posts:

Identifying Horizontal Support and Resistance from Previous Price History

Identifying Horizontal Support and Resistance from Previous Price History — Part 2

When the 6:55 candle was bearish, I felt I had what was necessary to support a put option set-up at 1.3272, expecting that the resistance level would keep price below. The trend was also slightly down.

Once price hit 1.3272 on the 7:00AM candle, I entered a put option. The trade received a nice boost down on the 7:05, and made challenges up to my entry point on the 7:10 and 7:15 candles, but the level held and ultimately expired about one pip in-the-money.

Given the set-up was still valid to me, I decided to re-enter the same trade, a put option at 1.3272, on the 7:20 candle. The 7:25 fell about five pips in my favor, before settling as about a four-pip winner.

In today’s trading, despite a grim early outlook, it came down to simply finding a good spot to trade. And since the situation was favorable, I was able to make the most of it and take two pretty good winning trades going with the trend.

As you can see below in the daily chart, the EUR/USD has been in a steep downtrend for the month of August, so with all the daily downtrends that have been frequent as of late, put options have tended to not be a bad idea.

The exchange rate is currently below 1.3200, which is a low that hasn’t been seen since the beginning of September 2013, about a year ago.

Related Content:

Trading Opportunities at Recently Created Levels of Support and Resistance