Forex Trade Example from Daily Chart

Spooky note. As I am writing this article (14th april 2009) I have just posted on twitter about a possible break of a daily trend line. 

Twitter 14. 4 2009 8.10 am gmt - "euro/gbp VERY interesting on daily. last 5 days moved sideways along 61.8 fib if breaks now cud pop to 88 area (150 pips below)

As you can see on this Euro/gbp daily chart, Fig 1. the bottom trend line has held on 3 or 4 separate occasions. On the 3rd small arrow from the left I made a 45 pip profit on the move upwards. On the large down arrow I posted on twitter that a break of this line down could signal a big move down.

Thus, I went next to the 1 hour chart, with all my emas on, for clues to support my theory that I was going to short (sell) this pair. See fig 2.

Fig 1.

Fig 2.

As you can see on the 1 hour chart the price of the pair is below the 34/55 emas which are also pointing down. Also price can be said to be riding the 5 ema down. The 5/8 ema cross down took place earlier. Everything is pointing down.

Finally the bollinger bands have opened down as well. The trade is looking good for a short. My final check is to go to the 15 minute chart for my entry.

fig 3.

This is the 15 minute fx chart for the pair. The yellow line that I have an arrow pointing to was the lowest point price had made in the asian session. Again all the emas are pointing down and we are below the 200ema. Price is riding the 5ema. The bollinger bands are open. The dotted green line was my entry point (break of overnight low).

The dotted red line is my stop loss (emergency exit). I have put the stop loss here as it is above the 200ema on the 15 minute chart. Above the 34/55 emas on the 15 min, 30 min & 1 hour charts. Above the highest point of the previous 4 hour candle.

Final part of the strategy ? Cross fingers and hope ! I can do no more ! If it loses it loses. I can justify to my trade journal that all the reasons for entry were good. If it doesn't work, simply move on to the next trade. Losses are part of forex. If forex were easy & behaved logically everybody would be doing it.

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