Live Trade (Order) – GBP/USD

Filed under: Live Trades |

I put a live trade order on the GBP/USD forex currency pair last night, and I would like to talk you through this setup a little bit right now.

Figure 1.

Figure 1.

 

To begin with, take a good look at Figure 1. This is the daily chart for the GBP/USD pair, which is the pair for the British pound and the United States dollar (sometimes nicked as ‘cable’). Although this pair has recently been in a downtrend (notice the 8-day exponential moving average crossed below the 21-day exponential moving average for most of this chart), it has now become stuck in a trading range, which means that the pair is consolidating. However, there is a fairly clear upper level of this trading range (marked with a horizontal green band), so it was this support level that I have been looking at for any bearish price action signals.

 

Yesterday, such a signal formed, which came in the shape of a massive bearish engulfing pattern, which took out the last three bullish candles. It was here that I put an order in to go short at a 50% retracement of the bearish candle, with a stop loss just a few pips above the high of the bearish candle, and a target set of three times the risk. Although this entry will mean trading against some short term bullish momentum, it seems that the level of support will be strong enough to hold, and this is the only way to enter and to have a good risk-reward scenario. I am doubtful about whether this order will be filled, as it seems that the bearish momentum will be too much and that price is likely to move down more. However, we will monitor this one and see how it goes over the next couple of days.

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