It’s a new week of forex trading, which means time to hunt for new opportunities. Today, I’m scoping out a simple downtrend on GBP/AUD, which should have volatility coming thanks to major events ahead. Check it!
Before you move on, for those who are not familiar with my framework, signals, setups, or acronyms, please visit my discretionary trading framework blog.
On this week’s economic calendar, we’ve got quite a few top tier events to hopefully bring some action to currencies. I’m looking specifically at the upcoming employment data from Australia to spark the Aussie, while U.K. CPI should bring some action to Sterling traders (check out the BabyPips.com Trading Guide for that event here).
We even have the Bank of England’s monetary policy decision, which usually isn’t a market mover because they haven’t made a change forever, but it’s something to definitely be aware of in case they finally make a change.
I’m not going to pretend like I know what’s going to happen with either event (nobody knows really), but I do think that if volatility brings the market up higher, we could see trend traders possibly hop in short where we’ve seen resistance lately: lower highs and previous psychological levels.
So, I look to scale into a short GBP/AUD position on a pullback. My entry points are quite wide since this is a big mover (467 weekly ATR) and because there are top tier economic events coming up. My stop is well above the previous resistance areas, and my max target is the support seen not too long ago at the beginning of April. Here’s what I’m doing:
Short half position at 1.8800, max stop at 1.9175, max profit at 1.8500
Short half position at 1.9000, max stop at 1.9175, max profit at 1.8500
I’m only risking 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.82:1 if both positions are triggered. 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!
This content is strictly for informational purposes only and does not constitute as investment advice. Trading any financial market involves risk. Please read our Risk Disclosure to make sure you understand the risks involved.