Students Question: The areas of support and resistance are near where I entered the trade and put my stop and limit on the expectation that the resistance line in the middle will turn into a support line. I also checked RSI and made sure that it had just come into neutral position after being oversold. Now, it looks more likely that the trade will be losing. What was wrong with the execution?
Power Course Instructor’s Response: First of all, congratulations on entering your trade in the direction of the trend on the Daily chart…that is key. When a trader is dealing with a range, ideally, you do not want to take trades in the middle of the range...too much potential for price action meandering around and causing stop outs. I see where you were going with the thought that the "mid line" will become support…and it could. However, it is best not to make suppositions of that type. Take a look at the chart below for a visual on this trade... The ideal "buy points" are noted on the chart. Also, using the RSI in a buying scenario, we would want it to be below 30 and then, to confirm our entry, we would want the RSI to be coming up through 30 for maximum momentum in the direction of our trade.