GBPCAD Price Action Trade Signal on Daily Chart

Cory Mitchell, CMT

The GBPCAD has presented a trade signal on the daily chart. This is a price action trade signal, meaning it is based on analyzing the swing highs and lows, and comparing recent price waves to each other. 

Background on This Price Action Strategy

The strategy uses an aggressive trailing stop loss, which means our stop loss typically gets to breakeven very quickly. Lots of small profits and small losses, with the odd big profit. This means that even if the price doesn't make a big run in my trade direction, I can still often capture a small profit or the risk ends up being minimal if I get any move in my direction.

I originally developed this method trading on 1-minute charts, pre-2010, but as I began focusing more on swing trading, this strategy was (mostly) set aside for more than 10 years. 

During a meditative-type session where I was visualizing executing my trades, I had a flashback to this strategy. It was super lucrative day trading because it never holds through a pullback which means regularly taking profits and compounding those profits on the next trades.

Price action trading works on all timeframes, and the daily chart makes it easier to share the ideas since the trades only need to updated, placed, moved one per day—when the daily price bar completes.

I regularly write articles that utilize different strategies. They are not to be compared with each other "But, you said this in another article". Each strategy has its own signals, entry method, and exit method. Take from each what you will. I am simply discussing how I trade.

GBPCAD Price Action Trade

Viewing this chart setup as declining buying momentum after a push higher in mid-April. We have begun moving back to the downside. 

  • Short at 1.7464 (just below April 20 low). This will vary by broker; use your own prices when trading off price action.
  • Stop loss above 1.7627 (April 21 high, which is when the short signal triggered). Again, will vary by broker.
  • Stop loss is moved to above the daily high as daily candles complete. While the April 22 daily bar has not completed, at this point it looks like our stop loss will move a few pips above 1.7519. This reduces the risk on the trade dramatically.

Trading based on price action is a dynamic process. It requires considering multiple scenarios. How to Spot Trends and Trend Reversals Using Price Action discusses the basic concepts. 

By Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.

Currently short. Price action is dynamic. That could change over the next couple of days.

Comments (2)
No. 1-2
CoryMitchell-CMT
CoryMitchell-CMT

Stopped out flat on the trade. Will await re-entry.

CoryMitchell-CMT
CoryMitchell-CMT

This trade presented the opportunity to add to the position. The April 22 formed a doji on the daily chart. It opened and closed right near the entry point, but also allowed the stop loss to be dropped significantly lower (above the April 22 high). With the risk on the trade now reduced, a larger position could be added, effectively bringing the risk up to what it was originally.

The trade remains the same, but now I have a larger position and the same % risk to my account as before.

The additional position was added when the price dropped below April 21 low. I only wanted to add to the position if the price kept dropping.

Both positions have a trailing stop loss, currently just above April 22 high. At the close of trading today, it will move to just above the April 23 high daily bar.


Forex Trade Ideas

FEATURED
COMMUNITY