GBP/USD: Buying the Breakout Higher
|GBPUSD : In the chart below, the pair made a bounce higher on December 23 2019. The pair found a temporary bottom and started a reversal by making higher highs and higher lows. Understanding how a possible short term trend can be forming is key to catching trade possibilities. Using trading filters/confirmations is also key to determine and to signal a trader on which side to trade the market. (Filter 1) When price moved above the 50 moving average (black) and the 20 moving average (blue) crossed above the 50 signalled traders that a possible reversal in trend could be starting. (Filter 2) The pair made a higher high and higher low (HH/HL) sequence confirming a trend higher is forming. (Filter 3) On December 26/2019 when price made a higher high it formed the first Bullish Momentum Price Action Breakout Pattern (pink). (Filter 4) This momentum pattern must first make a temporary peak then pullback and attempt a retest of the 50 moving average. Price must respect and not move below the moving average before breaking higher and triggering BUYS at the breakout peak. Stop loss is set at previous higher low. (Filter 5) Stochastic indicator shows a trend continuation divergence (hidden divergence) signalling a trader that the pair will push higher. (Filter 6) 2nd Bullish Momentum Price Action Breakout Pattern (blue) forms. 2nd momentum pattern (blue) makes a temporary peak then pullbacks and attempts the retest of the 50 moving average. Price respects and does not move below 50 moving average. (Filter 7) Price respects support/resistance level bounces higher and allows a trader to squeeze the trigger on the 2nd BUY breakout (blue) with confidence. 2nd entry stop loss set at previous higher low. Both BUY trade setups followed the trading filters and patterns to enter the trades and both trades hit targets (1:2 RR and 1:3 RR).
GBPUSD 1 Hour Chart
Of course, like any strategy/technique, there will be times when the strategy/technique fails so proper money/risk management should always be used on every trade.
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