Wednesday, January 6, 2010

EURGBP—didn’t make it through yesterday’s resistance

The remainder of my position stopped out at +5 pips after the pair failed to make it through its resistance zone. I just bought again based on the hourly chart where there’s a hammer candle. You need a price drop for this to be valid which there was. The stop can be just below the low of that candle which was .8926. Alternatively, the stop could be below the upward trending support line on the daily chart. This is at a significant horizontal support level as well of .8850.

This pair often moves slowly—it can be like watching paint dry. From 2003 until 2007 it stayed in roughly a 300 pip range which tells you something. A trade can be very profitable because of the higher value per pip ($16.05 per standard lot versus $10.00 for EURUSD). Of course, that cuts both ways if you get into a losing trade. You can always reduce your position size down when trading this pair.

Here’s the hourly chart:

On the daily chart (depending on how today’s candle finally completes) there may be an evening star candle formation in process. This three-candle formation (first a long bullish candle, then a doji or spinning top, and finally a bearish candle that closes well into the first bullish one) is bearish. However, the day isn’t over yet and there’s no way to know what it will do until it is.

© Dianne Fecteau, 2010. 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.

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