I am working on a system of posting live open positions, live approaching trade setups, and live trade potentials.
This is the first in the series of live approaching setups. We are currently experiencing an attempted break of a local channel on the GBP/JPY. I LOVE channel setups for both long and short trades because they offer a unique opportunity to catch large moves with little risk involved. Your stops should always be appropriate and tuned for your own account and trading style, but in general you can use the channel boundaries as good gauges for stop placement and knowing "when you are right, and when you are wrong". The upper and lower channel boundaries provide a confluence of aspects for many traders involved in the markets, so lots of action takes place upon them. When they break with a surge of price and volume, we achieve the second confirming signal that needs to be in place for a solid trade, the first being the physical chart setup. This current setup definitely experienced a nice surge in volume when the lower boundary of the channel was tested for the third time locally (within a few hours or days). I am not sure why, but breaks downs and breakouts usually fall on a third attempt, it could just be me, but watch for this pattern as there are a large degree of setups that break on a third attempt and do so on high volume.
My bias is neither way on this trade, but I would be more confident in a break down if it were to occur. The channel boundary can be used as a stop for a long trade (bounce on the boundary) or a short trade (break of the boundary). I personally use something like a 15-40 pip stop, depending on size and obvious support/resistance.
Happy Trading
Posts
No comments:
Post a Comment