Yesterday I was doing a lie webinar at FxStreet and one of the assistants reminded me of something, which could be the essence of trading, he said something like this:
Trading is about finding the right opportunity, with the lowest amount of risk.
He is totally right!
About Risk and Trade Opportunities
We have hundreds of currency pairs, thousands of opportunities each day. So our job as traders is to fin the right one or the right ones to trade each day.
Now, we need to understand something though.
There will alway be risk. It is something we need to live with as traders. There is no such thing as a risk free trade.
So embrace risk, learn to live with it… I guarantee that once you feel comfortable with it, comfortable about the fact that each trade has the possibility to go against you, you ‘ll begin to see more and clearer trade opportunities. As I said, I guarantee it.
I’ll write about it in my next article, today is more about the trade opportunity in the GBPUSD.
So stay tuned.
GBPUSD Market condition
As I said above, it’s our job as traders to identify the right currency pairs to trade, and which direction to trade on.
I like to do my analysis to determine which currency pairs to trade and the direction on the long term charts, 4H, 1D and sometimes the 1W…
For instance, here is the GBPUSD daily chart:
If you take away the red arrow, would you know which direction it was going?
I think it’s clear, since the market got rejected from the top of the range, I think it is likely to continue its way down, at least until it reaches the blue level at 1.5342.
Do you agree with me?
Ok, this is just part of the equation, we know which currency pair to trade, and we know the direction to trade it.
To determine the entry level we need to look at lower timeframes.
GBUSD Entry Level
Believe or not, once you know which currency pairs to trade and the direction to trade them, trading becomes much easier…
In fact, knowing the market condition of each currency pairs is much more important than the entry level.
You could have the best entry system in the world, but if you trade the wrong currency pair, you are doomed.
On the other hand, even if you dont have a very good entry system, if you trade the right currency pair, the market might favor you, just because that’s the most probable direction.
Agree with me?
Ok now, here is the GBPUSD short term chart:
This is the GBPUSD hourly chart. As you can see, we have clear support and resistance levels, green levels at 1.5875 and 1.5683 respectively.
Since it is trading in a very clear bearish condition, I know I’m going to be looking only for short opportunities.
I have two possible scenarios:
1- The GBPUSD breaks the support level, in this case I’ll trade the breakout, and set my entry order around 1.5665, my SL should be placed just above the support level (resistance once it breaks it).
2 – The GBPUSD retraces back to the ST resistance level at 1.5875, in this case I’ll how the market behaves around that level, if I see downward pressure, I’ll go short.
I favor the first scenario.
I have a few questions to ask:
What do you think about risk? Do you agree with my commentary at the beginning of the article?
Now about the GBPUSD…
Do you agree with me about being bearish?
If you are… Which scenario do you favor?
Let me know in the comment section.