Quote from Padawan:
Here's some info I learned about the GBP/USD today. Depending on your experience level - I'm a beginner - this may be way too basic for your tastes and that's ok. I'm not here to start a fight or argument, just passing along info that is not my own as I promised. This may or may not be useful for someone who's interested in investigating more about the GBP to make their own objective decisions. It is my wish that this be helpful. I am not a GBP trader or anything like that. Just interested in learning more about the markets to one day be profitable.
1) A fibonacci is always drawn from the top of a wave to the bottom of the wave
2) GBP/USD loves the 50% retracement
3) On the 4hr. chart recently we had a bounce of the 50% retracement (Dec. 12 high to Jan 22 low)
4) That bounce helped confirmed the bearish trend.
5) By going to the daily (or weekly if you prefer) chart and pulling a fib from the high in Nov. 2007 to the low in Nov. 2005, you'll see that the GBP/USD is headed toward the 50 fib line. This line also roughly lines up with several old highs as well.
6) So let's be oriented to the downside as price is aiming for support on the 4 hr. chart and is projecting to push through that support
7) When we cross that support we consider price going all the way to the 50% level on the bigger chart, making around 300 pips of potential profit for us.
8) When dealing with GBP/USD keep your stops 30 pips away from the fibonnaci level on any order, buy or sell. This helps save you from fake spikes up or down.
9) Money management rule - we shouldn't be greedy. Get out if your trade on GBP/USD goes 50 pips against you and only risk 2% of your equity per trade. If you see 20-30 pips profit, book it. Wait a few minutes and if the trend is going in the same direction, then enter again. If you see 15 pips this time, just book it. No need to think, "man, I'm going to make 100 pips this time."
10) Also, you can risk around 10% of your equity on a single day, that is the maximum. This means about 5 trades a day.
11) No one can be rich in one day, but if you follow this money management rule, in around 2 months you will have your account doubled.
12) don't use such stuff as robots, EA's, etc.
13) The G7 meeting happened saturday. In the upcoming days European Banks will be posting their balance sheet and all the banks are expected to show losses due to the subprime issue. This portends selling for the euro and the pound this week as people will prefer to buy the dollar this week due to the stimulus package and other fundamental reasons. So at the moment USD is favorable this week and bearish euro and pound.
Have a good week.
