I have been learning to trade the financial markets for the past 7 years now. Although I have an interest in all the financial markets, I am particularly drawn to foreign exchange, commonly known as forex trading. It’s only recent that I have made the decision to publish my learning process. I will just go ahead and jump into the most recent demo-trade I have made this week.
BUY GBPUSD 31 May 2017
This is essentially a 4 day trading week because Monday was a holiday in the US. Generally, when the US markets are shut, there is little volatility in the markets and most markets tend to trade sideways.
The US dollar has been weak of late due to US politics and president Trump. The probability of a rate hike this June is also high and the market may have sold off in the recent weeks in anticipation of the hike. The weakness seen in the dollar has meant the crosses have enjoyed upside moves, with the Aussie, the Euro and the Pound sterling enjoying rallies unseen in the last few months.
My winning trade of the week is a long in the GBPUSD and I will use the charts below to highlight my reasons for believing the pair would go higher from my entry point.
I always look for correlated markets when trading and my benchmark for forex is the US Dollar index. The shaded area represents a void in market pricing and I was looking for the void to be filled in. Yesterday price came down and touched the zone but didn’t ‘fill the void’ and so I was expecting price to come down and fill it. Trading in early London failed to clear the highs made in the Asian trading session, this was the prompt for me to look for plays in foreign currencies. Sentiment in the Pound Sterling has been positive so it was the first pair I looked at. The chart is shown below.
GBPUSD 15 minutes
While the US Dollar index was poised to trade lower to fill the void, I was looking for an institutional level on the Pound sterling chart. Yesterday’s lows provided an interesting point for me and I waited for price to show me what it would do as the dollar made it’s move.
True to for the GBPUSD swept yesterday’s low with a big move lower. The move also swept last week’s low at 1.2780 and rejected the levels with the next 15 minute candle closing above the low. I waited for the next candle to provide confirmation of a sentiment shift in the market and opened my long position at market (1.2797). My first profit taking target was yesterday’s highs at 1.2895 where buy stops would naturally be resting. As you can see from the chart the market has blown through the price level.
This trade offered a nice 1:3 Risk to reward and is the type of trade I considere high probability setup.
Disclaimer: Trading forex is risky. All the trades I share are performed in a demo account. The information I share in my blog is purely for educational purposes. I am not offering trading recommendations or ideas in any of my post. Past performance is not an indication of future performance and by reading the information I share, you are accepting the responsibility for any actions you may take based on the information you read.