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GBP/USD , Inside Bar Spurs Breakout Entrys

GBP/USD , Inside Bar Spurs Breakout Entrys

2012-01-30 20:19:00
Walker England, Forex Trading Instructor
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Like the majority of US Dollar pairs, the GBP/USD has been making advances in the open of the 2012 trading year. The pair is retracing a decline of 1209 pips, from the July 2010 high printed at 1.6617 to its current January 2012 low at 1.5408. With the trend at a standstill, traders may look to a developing inside bar to enter in on the next breakout for the pair.

GBPUSD_Inside_Bar_Spurs_Breakout_Entrys_body_Picture_2.png, GBP/USD , Inside Bar Spurs Breakout Entrys

Zooming in on Friday and Mondays price action (1D Chart) we can see the development of an inside bar. As described in a previous Chart Of The Day article, an inside bar occurs when today’s price action does not exceed the previous day’s high or low. Price action from Friday printed a daily high of 1.5740 and a low of 1.5640. Today’s action has so far yielded a daily high at 1.5733 and a low of 1.5633, both inside our previous candles levels.

Breakout traders can use entry orders to trade a break of either the previous high or low. Expectations are that price will break and continue forming either a new high or low past this point. ATR again will be the indicator of choice for setting profit targets on our position. Current ATR for the GBP/USD resides at 110 pips. 20% of this value, or 22 pips, will be our suggested limit.

GBPUSD_Inside_Bar_Spurs_Breakout_Entrys_body_Picture_1.png, GBP/USD , Inside Bar Spurs Breakout Entrys

My preference is to place entries on the GBP/USD near the January 19rd high/low. Both stop/limits will look for 22 pips for a clear 1:1 Risk/ Reward ratio.

Alternative scenarios include continuing to trade “inside”, prior to a breakout.

---Written by Walker England, Trading Instructor

To contact Walker, emailinstructor@dailyfx.com. Follow me on Twitter at @WEnglandFX.

To be added to Walker’s e-mail distribution list, send an email with the subject line “Distribution List” to instructor@dailyfx.com

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