Trading Plan for Today (Before 5 PM London Time)
This analysis focuses on potential trading opportunities in the GBP/USD currency pair today. Remember that trading involves risk, so it’s important to use caution and manage your potential losses carefully. This plan uses a risk of 0.75% of your trading capital.
Key Idea: We’re looking for potential price bounces off key support levels for possible long (buy) trades. While the US Dollar has been strong and the British Pound has struggled, we’re seeing signs that the GBP/USD might be ready for a short-term move upwards.
Long (Buy) Trade Setup
- Entry Points: Watch for bullish price action reversals on the 1-hour (H1) chart at these levels:
- $1.2245
- $1.2227
- $1.2206
- What is a Bullish Reversal? This means the price will reject the lower level and start to rise. Look for candles such as:
- Pin Bar: A candle with a long tail and a small body, indicating rejection of lower prices.
- Doji: A candle with a tiny body, suggesting indecision in the market, often followed by a reversal.
- Outside Bar/Engulfing Candle: A larger candle that completely “engulfs” the previous candle, signaling a potential shift in momentum.
- Stop Loss: Place your stop loss (the price at which you’ll automatically exit the trade to limit losses) 1 pip below the local low. This protects you from further losses if the trade moves against you.
- Profit Taking:
- Move your stop loss to break-even once the trade is 25 pips (a pip is the smallest price move a currency can make) in profit. This means your trade is now risk free.
- Take 50% of your profit off the table once the price reaches 25 pips of profit.
- Let the remaining 50% of the position run in the hope of reaching higher profits.
Short (Sell) Trade Setup
- Entry Points: Watch for bearish price action reversals on the 1-hour (H1) chart at these levels:
- $1.2315
- $1.2348
- $1.2384
- What is a Bearish Reversal? This means the price will reject the higher level and start to fall. Look for the same candle patterns listed above, but in the opposite direction.
- Stop Loss: Place your stop loss 1 pip above the local high.
- Profit Taking: Same rules as for Long Trades, take profits at 25 pips and let the rest run.
GBP/USD Market Context
In my previous analysis, I noted that the $1.2250 area was a significant resistance point. This proved correct as the market reacted to it and provided a profitable short opportunity.
However, the market is now showing signs of a potential shift. The price has been consolidating and moving slightly higher, breaking out of a recent downward channel. This indicates that the downward pressure may be losing strength.
Although the US Dollar has been in a long-term uptrend, driven in part by policy changes, and the British Pound has faced challenges due to economic data and government credibility issues, it appears that these factors are now less dominant forces in the GBP/USD pair.
Today’s Outlook:
We’re seeing a cluster of three potential support levels, suggesting that the price could bounce higher from these areas. This is a counter-trend trade, meaning it’s against the overall trend, so it’s best to trade cautiously and use conservative profit-taking strategies.
I am prepared to take a long trade if the price bounces from any of the identified support levels.
Key Points:
- Time: This trading plan is valid only before 5 PM London time today.
- Risk: Always manage your risk and use appropriate position sizes.
- Confirmation: Wait for a clear price action reversal signal on the H1 chart before entering a trade.
- Dynamic Market: Forex markets are volatile, and this analysis is just one perspective. Always do your own research and trade responsibly.
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