Day Trade Off Support GBP/JPY 12/05/2011
Here we had a nice setup on the GBP/JPY in the forex room on Thursday, unfortunately there was never more than 10 to 15 pips of follow through. Either way I would like to go through the setup because it was a good example of the confirmation entry. With any losing trade there is always something that can be learned and this trade was no exception.
The main problem I see looking back on this day trade is the consolidation prior to the entry. The market had been in about a 25 pip range for 3 hours and therefore we should have waited for the market to close above or below this range before placing a trade. Keeping track of your trades is extremely important. By doing so you can notice patterns of mistakes. Once you recognize a pattern you can correct it. You cannot correct what you don’t see, and therefore I recommend keeping track of trades to any aspiring forex trader so you can recognize those patterns.
On to the setup. As you can see the market came into the previous support, and did not close below it. Candle number one touched that support and closed above it. This meet the criteria for the reversal candle which is the first candle in the setup. Candle number two is the confirmation candle. The confirmation candle (candle #2) needs to close above the body of the reversal candle, and it very clearly did that. The first two candle are what give you direction, and therefore after these two candle formed we knew direction. The third candle is where we take the entry. We went long when the third candle pulled back into the body of the reversal candle, as per the rules of this forex system.
Your not gonna win every trade and this is a good example of a confirmation entry that simply did not have any follow through. If we would have taken the entry a little deeper on the pull back candle we could have managed to take profit on this one when it re-tested the channel resistance. That is one of the huge advantages with the confirmation entry, however when the market pulled back it bounced very fast, therefore making us chase the price a bit. Overall this trade was -30 pips on a half position.