On my previous post, I’ve shown a successful long wick trading signal. Here I am going to show you how the long wick signal can be failed as well as any other signal. Since there is no such a perfect system, stop loss always the savior for every trading setup.
On the chart above, we spot a nice long tail candle in an uptrend. In term of buying and selling pressure, this candle showing that buying pressure weakening. We go short on the breakout of the long wick candle. Our target is projected from the high of the tail to the breakout. Our stop loss is placed on the high of the candle.
The price move down for about 12 pips and on few next candle, the price move up and hit our stop which is about 30 pips. But don’t be upset when our stop is hit. Imagine if we do not put our stop. The price continue move higher about 120 pips and it can wipe out our account in matter of hours.
So, long wick trading system is quite good but since there is no such a perfect setup in Forex, stop loss is a wise protector.
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