The GBPUSD is no different and has a very similar structure to it.
We have highlighted the breakout bar that offered an initial long entry that we took with little hesitation as our edge had presented itself at the start of the year. Our edge is defined as follows:
Monthly - Price trading above the high of 2017.
Weekly - Price trading above the 50SMA and 200SMA.
Daily - Price trading above the 50SMA and 200SMA.
It is imperative that whenever your edge presents itself, and risk allocation permitting, that you take the trade. It is often at this point where many traders talk themselves out of placing the trade based on fear. Trading is simply a game of skill and probabilities. An edge defines an environment where the odds are in your favour and where you have more chance of making a profit than a loss. To make profit you MUST place the trade but to minimise losses, always risk small.
Every aspect of trading up to placing the trade is very much in our control such as what we trade, how much we risk, where we place our entry and stop, what strategy we use, how we compound. The one aspect that is very much out of our control is the outcome of the trade and that is down to random statistics. That is why it is imperative that you take trades that meet your edge without hesitation but, as already mentioned, ALWAYS risk small. You just never know which instruments are going to go on to return life changing sums of profit.
In addition, if the trade starts returning a profit, DO NOT take profit but instead compound into a winning position. If it goes against you, get out for a tiny and insignificant loss.
It is a time tested formula that has been used by the all the best traders and investors since well before the dawn of the internet.
Going back to the GBPUSD , since being triggered into the trade, and just like the EURUSD , this has also been slow and sluggish. Price moved into profit almost immediately, suggesting promising signs of a linear trend presenting itself, in the days after being triggered but is now back at our entry point. This has very much been the market conditions of FX since March 2015.
Price is now at faced with multiple support levels all in close proximity to each other. We would like to see this zonal area hold strong and for a bounce back to the upside. We then want to see price clear the resistance levels I have marked in and move towards the next key of 1.5000. Price also needs to clear the weekly 200SMA which is acting as immedaite resistance and has caused this recent pullback.
Price is now very much in an area of consolidation. As price still has a bias to it, we favour a breakout to the upside as support levels are stronger than resistance levels in a bull trend.
For now, we must exercise the all important skill of patience and wait for price to dictate what to do next. If we continue to see further weakness, then we will look to exit my trade with a loss of no more than 2%.
Any questions or comments, do not hesitate to leave them below.