EURAUD: Trading The Move Lower

The chart below of the EURAUD pair shows visible bearish signals where the pair would find sellers and allow a trader to get in the market. A trader should always have a minimum of three reasons to enter a trade.

In the case of EURAUD, the first reason was that there was visible evidence of a support and resistance zone (black) where the pair respected and reversed lower from. The second reason was that the pair formed a bearish divergence pattern (pink) in this zone, which added more evidence that bears will be entering the market. The third reason was that the additional bearish evidence was signaled when the price touched, respected, and stayed below the 200 Moving Average Dynamic Resistance (black), which was a sign that price would not push higher and would instead reverse and push lower.

The 200 Moving Average was also situated in the zone which signaled sellers that the support and resistance zone was a key area. Sell signals entered when the price started to push lower and the stop loss was set above the top of the bearish divergence pattern start point. Only a move above this level would invalidate the sell-signaled trade.

EURAUD eventually moved lower and hit the 1:1.5 RR – 1:2 RR target zone for over +100 pips. No matter what the reasons a trader uses to enter a trade, a minimum of three solid pieces of evidence will always allow a trader to feel confident in entering the trade, and also allow a trader to see the clearer trade setup.

EURAUD 30-Minute Chart September 30, 2020

Of course, like any strategy, there will be times when the approach fails, so proper money/risk management should always be used on every trade.