Hopping on the EUR/GBP Downtrend on a Pullback

Finally, got a decent pullback in EUR/GBP after several weeks of selling without a pullback. Are sellers ready to take back control?

Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.

EUR/GBP 1 Hour Forex Chart

EUR/GBP 1 Hour Forex Chart

For this week, I’m going with a simple trend pullback setup on EUR/GBP, a pair that has been unconsciously sold by forex traders without a pullback since trading around .7500 at the beginning of February.  Now that we’re finally seeing a pullback to a major psychological level (and a 38% Fibonacci retracement of the latest swing move lower), I’ve decided to take a small position to play the overall downtrend.

I’m taking a small position because of the potential market movers from the U.K. (MPC meeting minutes) and even the FOMC meeting this week. My stop is a wide one using the weekly ATR to hopefully weather any rise in volatility and my target is the previous swing low and a very significant psychological level.  Here’s what I am doing:

Short half position EUR/GBP manually (.7190), max stop at .7320, Initial target at .7000

Remember to never risk more than 1% of a trading account on any single trade. Adjust position sizes accordingly. Create your own ideas and don’t follow what I do. Risk Disclosure.

I’m only risking 0.50% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.46:1. Of course, anything can happen in the forex markets, so if the story changes I’ll be sure to reassess and adjust quickly if necessary. Stay tuned by following me on Twitter and Facebook!