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Tuesday, March 22, 2011

Trend for 22nd of March 2011

Today I want to write a few notes on how to add to a position in a trend and trade in the direction of the trend. On the 19th of March I wrote about a breakout in gbp/usd. This breakout wasn’t a false one and the move retained its’ momentum and we still see the price going up in the pair. How can you take advantage of these kind of moves and grab as much profit as you can? You trade in the direction of the trend by buying on dips if the trend is up and selling the rallies if the trend is down. Let me explain how this can be done. You will be able to understand better when you look at the chart on the bottom of the post. 

Gbp/usd pair saw a breakout up on Friday. On Sunday evening the pair started retracing back and it almost reached the breakout point of 1.6205 in the Asian session. If you studied how the pair retraced you will identify some sort of a channel with its’ lower and upper points. As you may understand, lower points served as support and upper points served as resistance. Now, if we had a breakout up, we would naturally expect the trend upwards to resume and therefore we would seek for opportunities to go up. So, we would simply place buy orders a few pips above the most recent resistance point and when the channel is broken we go up together with the market. During the European session the pair failed to go through the lowest point and formed a double bottom at 1.6203. It then broke through the most recent high of Asian session 1.6218 and resumed the trend that started on Friday. So, you had to place a buy stop order above 1.6218 and go with the trend upwards. The same could be said about today, but in order not to confuse you and give you more time to understand my method of trading I will expand on the lines tomorrow. Good bye for now. 

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Trading financial markets carries a high level of risk, and may not be suitable for all investors. All information on the blog is of educational nature and cannot be considered as advice, recommendation or signals to trade in any financial markets.