[TW] 3-30-2012 GBP/USD Short by longtermtrader

GBP/USD 4-hour

Long or Short: Short

Entry Point: At the open of next week (1.5990)

Stop Loss: 50-pips (above bearish engulfing candle high) 

Profit Target/s: 1.5900

Reward-to-risk Ratio: 2:1

Risk percentage: 2%

Indicators: None

Trade Rationale:

Mostly a technical trade as I believe the move up is overdone. As you can see, price slightly pierced above 1.6000 but quickly dropped and formed a bearish engulfing pattern. I’m convinced that resistance would hold and price would fall back down to 1.5900.

Trade Adjustments: None

Looks good, but I wouldn’t be surprised if price moved up towards approximately 1.6035 again before crashing down towards your profit target. I also wouldn’t be surprised if price then drops further down towards 1.5850, around the 38.2 Fib.

Given price is now at 1.6009, I’d like to see it drop 15-20 pips before entering…but like I said, I expect another small push upwards to tart off the week. Trix/Stoch seem to confirm that on the H1 and M30 charts.

But yeah, good trade imo :slight_smile:

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Stop loss catched at 8;26 GMT GBP/USD 1.653

I would be careful trading countertrend. The weekly is in an uptrend and still in phase one. MACD is convergent. Daily is also strongly trending up, and while Stochastic has been around the 70 level for a while, that is not a cause for concern without meaningful price action to support it.

There is a staying “those who try to pick tops and bottoms end up with smelly fingers” :wink:

My strategy is to wait for price to come back and test the resistance turned support for a higher probability long trade. I’ll wait for p/a confirmation. That will take a few days, but I’m happy to wait.

(I understand that there are countless ways to trade the forex markets, and this is more me providing an alternative view than a critique of the trade suggested above)