{"id":49263,"date":"2019-03-04T13:19:00","date_gmt":"2019-03-04T18:19:00","guid":{"rendered":"https:\/\/www.ino.com\/blog\/?p=49263"},"modified":"2019-03-04T13:19:00","modified_gmt":"2019-03-04T18:19:00","slug":"copper-triggered-a-short-entry","status":"publish","type":"post","link":"https:\/\/wwwtest.ino.com\/blog\/2019\/03\/copper-triggered-a-short-entry\/","title":{"rendered":"Copper Triggered A Short Entry"},"content":{"rendered":"

So, dear traders, our patience was finally rewarded last week. Copper has provided us an even better opportunity as the price climbed higher to make a deeper retracement and the distance of the drop is now even greater. We started from the $2.75 level<\/a>, then we moved higher to $2.885<\/a>, but none of them were activated.<\/p>\n

I spotted the famous reversal pattern on the chart, which adds to my structure analysis and I will show it in the chart below.<\/p>\n

Let\u2019s go through the trade setup steps again as the entry signal was triggered.<\/p>\n

Step 1. Chart Analysis and Step 2. Trading Idea<\/h2>\n

These steps can be skipped as we already know<\/a> what we are looking for.<\/p>\n

Step 3. Trade Setup<\/h2>\n

We should prepare a Sell Setup to enter the trade using specific entry, stop and take profit levels. These are the things that make a trade. If you don\u2019t have all three levels in your mind, you better avoid trading as it would become mere gambling. <\/p>\n

Identifying Entry Level: Copper Futures 4-Hour Chart<\/h2>\n

\"Copper\"
\nChart courtesy of tradingview.com<\/em><\/small><\/p>\n

Last time I used the 1-hour chart<\/a> to show you the entry trigger. It was not activated as the price of copper moved higher. This is why I like this strategy as there is no guessing. <\/p>\n

This time the price spent more time in the same higher area and I switched to a bigger 4-hour time frame. We can see here how two consecutive tops (red arcs) peaked at the very same level of $2.977. This shaped a Double Top reversal pattern with a Neckline (the lowest valley between tops) at $2.928. <\/p>\n

Most of you are already aware of how to trade this pattern. The entry trigger in the chart above (blue horizontal line) was set at $2.925 (3\/10 of a cent below the Neckline). It was executed last Friday as copper futures dipped to the $2.9225 low. <\/p>\n

The RSI indicator in the background confirms the entry trigger as after a long-lasting Bearish Divergence it finally broke below the 50 level, and at the same time, the Neckline of a Double Top was breached. <\/p>\n

Stop Loss<\/h2>\n

Pain is part of the game as we are only humans and we can be wrong. To limit our risk, we should exit the position according to our trading strategy. I would set the stop-loss order slightly above the highest top ahead of the breakdown of my trigger. <\/p>\n

In this trade it should be placed above $2.977, I would put it at $2.985 as it was highlighted in the chart above with the red horizontal line. <\/p>\n

Target<\/h2>\n

I showed you the target in my earlier post<\/a>. The former low of $1.94 is the main target. I would move it only if the structure changed dramatically. <\/p>\n

Risk\/Reward Ratio<\/h2>\n

Your planned profit should exceed predetermined risk; otherwise, there is no reason to trade as statistically even if half of the trades are winners you would end up losing your account.<\/p>\n

Our risk expressed in price difference if we put a stop loss at the $2.985 against the entry of $2.925 is equal to $0.06.<\/p>\n

Our potential profit is equal to $0.985 ($2.925 - $1.94). <\/p>\n

Then the risk\/reward ratio is equal to 16! Which is much better than the industry recommended ratio of 2-3. <\/p>\n

Step 4. Risk Management<\/h2>\n

Everyone should follow his own rules in this aspect of trading. Some will risk up to 5-10% percent of their account per each trade; others stick to the 1%. We should just bear in mind one thing \u2013 this is not a swing trade or other short-term positioning. The position could take a longer time to play out, but the ratio of 1:16 is very rare, so I would risk here more than 1% up to 5% in contrast with the strict risk approach of 1% per deal for a short term trade. <\/p>\n

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Would you enter this trade?<\/strong><\/p>