04/10/2011 GBPUSD Short hits T1 @ 1.5360. 200 pips profit so far.

Here’s a quick piece on a trade from this week on the GBPUSD. It hit T1 yesterday and now I’ll wait and see what it does from here. On the weekly chart we had an inside bar that was also a hi-test bar against the moving average. Cable has been in an aggressive down trend for the last few weeks as the USD has strengthened across the board. Last week there was a slight re-bound which produced an inside bar that was also a hi-test bar. A nice price action set-up that I like to trade.

Because of the nature of the set-up and my knowledge of the strength, trend and momentum of this pair I was happy to take one of my aggressive entries. One of the other reasons was that there was a line of support in the 1.5350 region that I was concerned about (see thin red line).  If we go down to the 4 hour chart we can see how this playing out.

I had decided to take an aggressive entry on the 4 hour chart (my prefered way of playing weekly set-ups). So I had an entry order of 1. 5560 with a stop-loss of 1.5675 ( a risk of 115 pips).  My target was at 1.5360 just ahead of my view of support levels at the 1.5350 area.  I’m always wary of whether price will double bottom at a significant support level. Normally I would happily take my full position off at such a level. However one of my trading objectives for 2011 was to let my position trades run as long as possible so now I just either scale our or trail my stop till I’m taken out.

I wasnt expecting price to drop so quickly but over the last 48 hours, the trade triggered and moved nicely to main target 1 @ 1.5360 for a 200 pip profit.  After hitting my target, price subsequently re-bounded forming a nice double bottom.  My Stop-Loss is trailed so I have no idea whether price will break this level and continue down or whether it will bounce back-up to my entry-level. Who knows, I shall wait and see.

I hope you’re all trading well during these turbulent times!

Until next time, trade well.

FXTraderPaul