USDJPY H1 – Trade Analysis
Trading the supply/demand signals directly, without taking anything else into account, is a common mistake which often leads to losses. Demand during a strong downtrend can mean it’s profit-taking or just some buying, that may or may not have a follow-through. In this trade,
1. The background was weak, and so we should be looking for short positions (in weak signals), as explained here Supply/Demand + Background.
2. Next to the demand bar, there was a no-supply test (painted as blue), that was testing lower prices for supply. The prices however didn’t rally afterwards and break its high – if professionals were interested in buying, they’d get in after such an indication of no-supply, and a rally would follow, which did not happen, and so the latent supply kept on moving the market downwards.