GBPUSD—Back in the channel

Last Friday I opened two shorts in GBPUSD, one at 1.6555 and one at 1.6530. The 1.6530 trade hit its profit target this morning and earned 225 pips. The other one is still on. You can put on trades that earn over 200 pips as well. It’s a matter of doing the analysis, picking careful entries, and keeping your stops tight to keep the losses small.

Apparently the price point I indentified yesterday (where the two trend lines crossed) was not only uninteresting to GBPUSD but absolute anathema. A look at the three hour chart shows it is back inside its channel. This doesn’t mean it won’t climb out again, especially since it’s at a support line (the orange line). I wrote yesterday that the point where the red and blue lines come together shows a symmetrical triangle. While it fell below the uptrend line it could climb back in—pairs do it all the time. If it does, that might be a clue to lighten shorts and/or go long.

While the pair broke below the blue trend line, RSI is currently at its trend line. Normally I’d like to see RSI break the line first and then let the price break confirm the RSI break. But if RSI breaks, too, you have confirmation of the price move.

The current 3-hour candle (as of 6:30AM EST) is not yet decisive. Since my position is currently up 250 pips and I already have one profitable trade closed, I won’t do anything right this moment. But you can bet I’ll be watching this and the shorter time frame charts. The 15-minute has formed a hammer and price rose but has since dropped back. The one-hour chart is unremarkable at the moment except for some candles with upper wicks (a hint that higher prices are being rejected). Here’s the 3-hour chart:

© Dianne Fecteau, 2009. No part of this material may be reproduced in any form, or referred to in any other publication, without the express written permission of the author.
My purpose in writing this blog is to show you how one trader, me, makes trading decisions and survives while trading Forex. One of the biggest problems I had when I first started trading was trying to apply the “rules” to actual trades. Another was the psychology—limiting losses and letting profits run. If you study my blog you’ll see how I deal with both those issues. So my writings are not trade recommendations but rather educational in purpose. You have to decide on your own approach to trading. Remember that trading is risky.