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.
- The original stop loss determines the position size. To calculate position based on your account size and desired risk level, see Position Sizing Methods for Trading Forex.
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.