Today we saw another trade take profit and work out according to plan. There were a few bumps in the road but like every other trade, that is ok. Let's take a look at where it came from vs. where it is right now. We entered this trade at 1.68335 at the top of the resistance. If we were to draw a line straight across the top we could see that this indeed is resistance. That is our first clue. Second, when we are looking at this trade our stochastics are extremely overbought, not just on one time frame but in this case ALL time frames (M30, H1, H4 and D1). The other thing that happened here was that we could see after the second to last candle stick ended bullish yet very indecisive due to the length of the wick, that we were due for a reversal off the WR1 level. All of this together is clue that we are headed down to a support level. Take a look below at the chart.
Ok, now, once we hit a major resistance level and can see that a reversal is probably going to happen, we are looking for what I call "a noise trade". A noise trade simply means that you are looking for a bump in the road, we may be going higher and there are Gartley's and things like that showing we would be going higher, but for now we are just looking for some sort of small retracement. Small in this case was 80+ pips but in the long run it was small compared to where it could go on the weekly charts. See once a trade has hit that major resistance level a sort of psychological short comes into play creating an impulsive trend. The markets will end up going short because people think it will; a lot of traders in the market anticipating something will drive the money that direction, sort of supply and demand theory.
As we can see now by looking at what has happened that our trade has taken profit and the market seems to be still moving in our original direction. We can also see by looking back that there was a spike in the market during our trade.
As of the time that this screen shot was taken, the market was at a 50% level of retracement from the low of last week. that's ok, that would tell me that there is a possibility that it might run to 61.8% maybe further. don't take a trade unless you are sure though.
Diversify Your Wealth; Forex Investing From The Beginning: GBPUSD Trade Signal
Good Luck and Happy Trading
hi Pinnacle Forex Group
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