Trade 3 - 5: Navigating Swing Failures on Both Ends of the Range

Following the FOMC announcement, Bitcoin experienced a significant upward movement. As the evening progressed, it began trading within a relatively tight range, presenting opportunities for breakout trades and potential swing failure setups or liquidity grabs. In total, I entered three trades—two with sound rationale and one that, in hindsight, lacked justification.

Let's dive into the details, but first, let's examine the mini range in question.

With this new range established, I endeavored to remain objective about price direction, basing my trades solely on price action. However, I must admit that I harbored an upside bias, which will become evident in the details of my fourth trade. But let's start with the third.

Swing failure pattern at the range high As the image below illustrates, we observed a break above the mini range's high. The break was accompanied by relatively high volume, an increase in delta, but also a sharp decline in open interest. I opted to take a short position near the high, with an initially tight stop.

As the price retreated into the range, the trade appeared promising. However, I became hesitant due to the price's sluggish movement (likely influenced by my upside bias) and decided to take partial profits prematurely, move my stop to break even, and enter a long position for my fourth trade. My justification at the time was a slow retracement and a slight bounce at a (now cleared) daily level. In retrospect, this long trade was not a valid setup and should not have been executed.

The price continued to decline, triggering the stop loss on my long position. It remained below the mini range for some time before re-entering, hinting at a failed auction.

Here, I initiated my fifth trade (indicated by the small green circles). Shortly after entering, the price surged upward, causing my third trade to hit its stop loss, while my fifth trade remained open and profitable. I plan to let this trade run through the weekend, provided the price permits. Personally, I believe the next move will be upward, and this trade may capture some of that potential.

To be continued.