This live Forex trading example combines two important events on the 5-minute chart of the GBP/USD Forex pair. This is the interaction with a Forex resistance and the followed channel breakout. This created a nice short trading opportunity on the chart, which I took advantage of.
Signals of the Short Forex Resistance Trade
- The GBP/USD has been moving into a bullish channel that was many times tested at the upper and the lower level.
- The bullish channel brought the price action to the resistance at 1.2860, that is older and few times tested.
- As a result, the price bounced from the Forex resistance at 1.2860 and broke the lower level of the channel.
- The price created a bottom after the channel breakout and returned to the already broken lower level to turn it as a resistance.
Stop Loss and Target of the Channel Breakout Position
I placed my Stop Loss order above the resistance zone at 1.2860. This way I contained all the tops that are located above that resistance area, which makes my trade secured.
I measured the previous two bearish impulses in order to get a picture about my potential target on the chart. However, I also used the Fibonacci levels to see if this target is close so some of the psychological Fibo levels. I saw that the usual bearish impulse goes below the 61.8% Fibonacci level. I decided not to take bigger risk and I placed my Take Profit order at the 61.8% level. Since this level is fully contained by the gray rectangle you will see in the video, it looks like a reasonable minimum target for my trade.
Live Trading Example
Notice that the price action reached exactly the area of the 61.8% Fibonacci level and it started hesitating afterward. This is why I decided that this is a reasonable target for the trade. After all, if you want to aim lower than 61.8% you should be prepared to meet some support at the 61.8% of the previous trend.
Bottom line, I collected 15 pips profit, which equals to 0.12% for about 15 minutes. I wish I had more 15 minute trades that bring 0.12% profit.
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- 61.8% Fibonacci Level
- bullish channel
- channel breakout
- Fibonacci Retracement
- Forex resistance
- resistance bounce
- Support and Resistance trading