Breakout Trend Continuation on the GBP/USD 11/08/2010
As I was explaining in the live forex room today we have seen some tough trading for this entire week if you are a short term forex trader. When you open up your trading platform and see a huge move in currencies before you got there it makes for tough trading, and here is why. As a short term trader you must use tight stops to keep a good risk/reward ratio. So as you examine a market that is near or past it’s trading range the possibility of a retracement is strong thus making a continuation trade risky, and additionally taking a retracement trade presents risks due to the fact that the general momentum is down and thus against you. Again as a short term trader with very tight stops entries are everything and without much room for error you have to be careful on days where you come in after a large move. Now lets take a look at today’s entries.
Today we took 3 trades. The first 2 trade setups ended up break even over all, one positive and one negative. On the third short term trade we closed out with a nice +25 pip profit or +2.5%. The red candle with the black line through it represents the area we got in as well as the candle we entered on as well. The reason I entered on this trade is because of the closing price of the previous candles. The red line represents the low of the candles and thus the support level I wanted to break. It is my personal belief that the body of the candle and not the wick holds the importance. So when I saw the candle we entered on breaking below the previous candlesticks bodies I decided to short the GBP/USD on a continuation of the trend. Quickly this trade hit profit and we closed this one out for +25 pips overall.