Ok, so be honest. How many of you thought we were crazy when we said look for mid 1.8700's. Well, hopefully you caught the bottom of the move from yesterday and jumped on for the ride.
However, don't beat yourself up if you didn't get in. Remember, taking no trade is better than jumping into a bad trade for bad reasons. Anyhow let's move on to the trading outlook for tonight.
Let's start by determining whether we want to look for a long or short...or both.
Tonight's chart presents a few problems in our effort to find a trade. Let's look at a few of them.
First of all, we are in "no man's land" from the stand point of looking for a short. There aren't many indicators in this price zone, at least not indicators we look at.
There is, however, some short term reasons to look for a short based on the MACD of the 4 hour chart. But, that's not much to base your trading on.
Then again, in the spirit of fairness and in our effort to teach you as much as possible in these newsletters, there is a "make-shift" resistance level at around 1.8880. You'll need a bunch of additional reasons to go short there, so look for quality price action (e.g.: Candlestick formation) to help gauge whether or not you should look to enter a trade around there.
In case that doesn't give you enough to look for around that price, here's more. I wouldn't be too surprised to see Cable break above 1.8880 and then run all the way back up to near 1.9000 since there isn't much resistance in those 120 pips above the level (1.8880).
How in the world are you supposed to use this information to trade? Well, here is just a simple idea. IF you are trading Cable when price reaches this area, pay close attention to the price activity. Look for patterns like double tops or candlestick formations to help you determine if the level is holding as resistance.
If, on the other hand, Cable breaks through relatively easily, maybe it's best to wait for a pullback in conjunction with price activity and look for a long.
This is a more advanced trading setup since both a long and a short trade COULD be in order at this price level. If you are unsure what to do, DO NOTHING! You should only trade at your comfort level.
As far as a support level goes. We're going to keep watching the mid 1.8700's again. Let's just remember that we have seen few legs of a downtrend over the past few days on an hourly chart.
If that pattern continues we could see a lower low than the one that was just formed. For those of you who wan to play it very conservatively, you might now want to look to go long.
Remember, decide what makes the most sense to you. It makes no sense to mimic others trading styles, since their risk tolerance and necessity for profit can vary greatly from yours.
I am sure that you can clearly see how valuable it would be to develop your own independent trading style. Take the steps to get yourself on the right track.
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