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Forex Trade Idea: 2015-01-12

Got a potential market mover from the U.K. coming up Tuesday, so I’m looking at a simple Fibonacci play on GBP/USD to get into a swing play.

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

GBP/USD 4 Hour Forex Chart
GBP/USD 4 Hour Forex Chart

Again, nothing much to this trading setup as I’m looking to short Cable on a pullback higher to a couple of technical arguments: moving averages and the Fibonacci retracement area as a potential resistance area. I like a short play not only because of the current downtrend in price action, but also we’re about to get year-over-year U.K. consumer price inflation data. This data has been on the downtrend and the forecast for tomorrow’s yearly number is a tick lower to 0.7% from 1.0% previous. Of course, I don’t know what we’ll get but the probability is for a weaker inflation number since that has been the trend around the globe.

If the pair does get up to my entry area around the 61% Fib, then I’ll use a wide 1 weekly ATR stop, and my target will be the swing low. Here’s what I am doing:

Short full position at 1.5385, max stop at 1.5585, profit target at 1.5050

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 1.00% of my account on this one, and with this trade structure, I have a potential reward-to-risk ratio of about 1.67:1.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!

And on a side note, I’ve closed down my USD/CAD long and CAD/JPY short orders as they both went in my direction without the pullbacks I was looking for….doh!

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.