Should have traded when it fell back in channel.

Journal Entry from European Session Monday Morning

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I'm just now entering a journal entry for a trade I made this morning at 4:30 am.   We had a breakout of the upper channel GBP/USD at 4:30 am this morning and I thought we may see a little volatility so I went long at the close of the candle.  As you can see, it was quickly stopped out as the price entered back in the channel.

According to Rob Booker's rules, if the price falls back into and closes back into the channel, you can reverse your trade or place a new trade if you were stopped out.

I was stopped out and should have went short on the GBP/USD once this happened.  I would have had a stop at the bottom of the channel which would have been good for 50 pips or so.  

There's always next time. 

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Steve Shenker’s Trading Corner

It's actually Sam Shenker's Trading Corner and it can be found here:

http://www.forexproject.com/Blog/Investing_and_Trading/Original_Traders_Corner/

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Consolidation Flags and Broadening Formations

There is a new article on Investopedia with instructions on trading 2 consolidation patterns for profit.

The first is the flag formation which is a common formation in the currency market and indicative of a continuation trend.

1.    Apply trendline to identify the flag formation
2.    Place stop 5 pips above the high or 5 pips below the low of the recently closed candle ONCE a close above or below the trendline has occurred.
3.    Place a corresponding stop two-thirds below previous session’s high or low.
4.    Use your specific rules regarding corresponding limits 

The second is the broadening formation which is commonly a consolidation before the reverse but could also be a continuation indicator

 
1.    Identify the broadening formation through diverging trendlines
2.    Apply entry 5 pips below the low or high of the session once a break has occurred
3.    Use appropriate money management
4.    Use your specific rules regarding corresponding limits

 

 

This article is elementary yet a good refresher.  http://www.investopedia.com/articles/forex/06/ConsolidationPatterns.asp

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