First, let me say that making +130 pips in a day on a trade is not the end all, be all of existence. It is, however, a bunch of pips, and something to enjoy when it happens. I put this trade out there to show how you can look at a chart and see what the market is thinking. In this case it is the GBP/JPY, which we traded yesterday for about the same gain, but using a different thought process (click here for the set up of that trade, and here to see the results). In this trade, I was watching to see if the pair would come back up through the resistance line and into the channel. What I saw was several bounces off of the line, as if the pair just didn't have the power to stay above it. This says that the resistance line (or, alternatively, the support line) is too strong and, in this case, that the seller's were likely going to win. The chart looks like this:
I entered the trade after the 5th failed attempt on the S/R line. I was short at around 149.00 a bit before 0800 EDT this morning. The pair made another failed assault on the line, then gave up and fell 100 pips very quickly. This pair particularly, is known for these type of quick moves and is one of the reasons trading it is so popular. I stayed with the trade until it looked to be hesitating between 1030 and 1100 EDT. I exited with +130 pips in my pocket. All because I was watching the support/resistance line and paying attention. Happy Trading!
