GBP CAD Day Trade Long Entry – Methodology

GBP CAD Day Trade Long Entry – Methodology

As there still isn’t anything convincing for a Swing Trade right now, here’s details of a day trade long entry I took this morning in GBP:CAD and an explanation of the methods I used to enter the position..

On the 15 minute time frame this morning’s price action appeared to print a higher low. As momentum gathered I noticed price had found support above the 20, 50 and 100 MA’s (depicted by the 1st circled candle). From then on I was looking for a test of, and hopefully a break of the previous 15 minute swing high depicted by the red line. As price tackled the 200 MA, I entered long (1.5720) with a tight stop loss below the low of that 1st circled candle.

Price then continued to rally and eventually reversed from a swing high, so, I placed the Fibonnaci tool from the low up to that high on the basis that I’d raise the stop loss to just beneath the 50% fib level (which happened to be around breakeven).

As can be seen by the 2nd circled candle, the 50% fib offered support. If price had fallen below this fib level I’d have deemed the price action too weak for the trade to be satisfactory and I’d have closed the position for a small profit or break even.

Price has since continued to find strength and I’m now looking for an attempt at re-testing the day’s high. If a lower high is printed, I’ll exit the trade at the first opportunity:

From a Bullish Perspective we do have the possible formation of a bullish cup and handle and MACD positive divergence as can be seen in this hourly chart:

In reality though, I don’t hold much hope in the trade turning into a swing trade. It would be nice if it did, but on the face of it this daily chart looks like it probably needs quite a bit more work for us to be satisfied a sturdy bottom is in place, and in all honesty the price action has an appearance of simply being a retrace inside a bear trend:

Whatever happens, stop loss is now at break-even which means no loss will be incurred and if I’m at the screen and price starts looking weak I’ll just exit the position. On the plus side, you just never know, it might find momentum and offer a few more pips than I bargained for.

  • RS2OOO
    Posted at 07:56h, 25 January

    Closed the long at 1.5771 for +51 pts ahead of UK data due out this morning.