Result of 400+ Forex Pips Analysis

In last weeks article I showed you how to look ahead. Look for areas of potential reversals or break outs and make a plan. I also explained how crucial support and resistance lines are to a forex trader.

Plan the Trade. Trade the Plan.

What to do when price comes into the area of interest. The 1st chart shows you where price was at the close of the market on friday evening.

Gbp/$ trending sideways on 4 hour forex chart

My original thought was that price looked likely to bounce back down again, but in my defence ! I did say:

“The other option is of course that price may break through (up or down).

Do not be tempted to dive in. Wait for a candle to close. Often price will break through an area of strong support or resistance. Come back to that line and THEN continue the move”.

This breakout followed by a pull-back is known as resistance becoming support or vice versa. Which is exactly what happened.

Break out, then Pullback of range and upper resistance line on 4 hour forex chart

Bear in mind this was a 4h hour chart so you had all week-end and more to plan the trade.

I switched to the 15 minute chart after the 1st candle closed to look for areas to enter, at the 1st arrow.

The next trade was a short. Either from the top of the move, which would have been very risky, or the more conservative trader would have waited until the red hammer candle closed below the 1.6600 . The short was a great trade. You had

1. The huge reversal candle.
2. Break and close back inside the previous range.
3. The spike/pull-back to the area of 1.6600 again – my entry point.

At this point my main target was back down to the 1.6200 area. Unfortunately I moved my stop too close and was taken out + 110 pips. I still have a problem with getting out too early. It goes back to my days of trading 15 minute charts and getting out at the 1st sign of trouble. The more disciplined trader would be still in now + 270 pips.

A further thing to notice is how price reacted around the various fib lines on its journey south.It is currently bouncing around the 78.6 fib line. My normal strategy says that a break down of this area would signal a reversal on this pair. We need to tread carefully in the early part of the week whilst the big traders decide whether this is the case.

If this all seems to complicated there is another way ! As you know lots of us are having tremendous success with the LMT forex formula (alex made 800+ pips last monday). It gives a signal. Tells you when to buy or sell. You check a few rules and it passes, you take the trade. If you would like to know more about it check out my review:

http://forex-fxtrader.com/blog/l-m-t-forex-formula-review/

Or click on the following colourful link;

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