Live Trade – GBP/USD

Filed under: Live Trades |

I have just had a trade fail on the GBP/USD pair, and I would like to evaluate and take you through this trade setup right now.

 

Figure 1.

Figure 1.

To begin with, let’s take a look at Figure 1. This is the 4-hour chart for the GBP/USD forex currency pair (the pair for the British pound and the United States dollar). What you can see here is that price has recently been moving down with some bearish momentum, with the fast moving average crossed well below the slow moving average. I have also drawn in a good area of support/resistance on this chart (marked with a horizontal green band). So, once price went through this area of support/resistance, and more importantly, closed below this area, I was on the lookout for any bearish price action signals.

 

A bearish price action signal came in the form of a bearish pin bar, which seemingly rejected our area of support/resistance. At the close of the completion of this pin bar, I put an order in to go short at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a target set of two and a half times the risk. Unfortunately, this order was filled and the trade moved against us, eventually hitting the stop loss.

 

Figure 2.

Figure 2.

I felt that this setup was a strong one, but if you look at Figure 2, which is the daily chart for the same GBP/USD pair, you will see that price could not close beyond the daily support/resistance level, and as such, this should perhaps have been a cause for concern. This is a grey area of our methodology, and it is something that I will have to give more thought to. But for now, we must record this as a loss I am afraid.

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