Weekly Trading Lesson: Intersecting lines

For that reason, it is a better policy to wait for those points on the chart, where at least two independent indicators give us the same (trade) signal. For example, the following (1-hour) chart shows the GBPJPY as it has pulled back from it’s progress in a major uptrend, to find intermediate support where the market has established a ‘double bottom’ pattern at the 38.2% Fibonacci retracement level. If the market reverses course back to the upside at this point, our pro-carry trade to the long side provides the trader with a favorable risk to reward ratio. However if the market breaks down and closes below this point, we can hold a short position with a greater amount of confidence knowing all those ‘long’ traders must exit their positions, which in turn could propel the market that much lower. In either case, with each additional source of confirmation, larger amount of traders will join the battle, ultimately forcing the market to break, and help propel the market into the next trend with a renewed source of momentum.