GBP/CAD has been a waterfall trade since losing the 1.7480s offer textbook trade set-ups for favourable risk to reward short trades.
The price offered a textbook trade setup yesterday and is on the verge of providing the same opportunity in real-time at the time of writing.
What follows will be an example of how to enter a correction on an impulse for a high probability a favourable risk to reward setup...
Given the market dropped to below prior support, melting from 1.7415 structure, the trade can be taken at market considering there is still a 1:3 risk to reward and that 1.7415 should now act as resistance if there is a pullback to take the position into 50% drawdown.
However, it is probable that the current entry will also now act as a resistance:
Additional analysis shows that the price is well below significant counter-trendline resistance.
The significance of this is favourable for an extended profit target to the July/Aug volume point of control at 1.7408.
The profit target can be extended once the trade is breakeven and a trailing stop can be applied appropriately.
The task at hand is to move the stop loss to breakeven as soon as there is new resistance structure following a break of the current sideways consolidation between entry and current lows of 1.7404.
In hindsight, the entry was premature, although the stop can be moved to the ideal entry-level as a precautionary measure as the new structure has formed where otherwise, the trade would be risk-free by now.
Meanwhile, a close below the figure will form a new resistance structure and enable the stop to be moved to breakeven.
Update: Breakeven achieved
The trade is now risk-free, 0:3.
As can be seen, the market moved back from 1.7380 to trigger the stop loss at 1.7407.
However, a new trade set up was triggered as the price moved back below the figure as follows:
As the price broke down again, there was the opportunity to set a sell limit at the resistance structure for a 1:2.5 risk to reward with the stop loss above the highs.
The sell limit was triggered and the market melted for breakeven and then the target was finally achieved.
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