Alert to The GBPAUD Breakout

FX:GBPAUD   British Pound / Australian Dollar
The GBPAUD is now very much near the top of our watchlist as it has broken out of an area of consolidation that dates back to December of last year. The top of the consolidation area formed a resistance zone at the round number 1.8000 which price is now trading above for the third day in a row.

Aggressive traders may already be long on this currency pair. Short traders who entered on a lower timeframe at 1.8000 resistance broke the cardinal rule of trading and that is trying to pick a top of a trend. The very nature of good trading is to follow the principle of the trend is your friend. There are, however, certain times where patience must be applied and that is at key levels of support and resistance . This is where we stand aside and wait for price to dictate a break through.

Price has now indeed broken through and is suggesting a trend continuation. However, here at Sublime Trading we have a number of rules that we and our community follow to remove the subjectivity of trading.

One of those rules is not to enter in on the first breakout from a period of consolidation that extends over a defined number of days as this can often be a fake breakout. The first goal of any good trader is to focus on capital protection first. Unnecessary losses all add up and can very much be avoided by applying a little patience at certain times. This is a perfect example.

What we are now waiting for is a retest of the 1.8000 support zone (which is where price can often continue to weaken and reverse back into consolidation) followed by a second breakout ideally in the form of a bull flag . This will then offer an entry point into the bull trend.

Once we are triggered in, we would like to see price move towards the key round number 2.0000 as the next main area of resistance, although 1.9000 could prove to be a sticking point for price too. We now want a neat liner trend to emerge that will allow us to strategically add compounds as price continues to ascend.

It is now a waiting game and we must apply patience for our setup to present itself.

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