Update on GBPUSD Short Trade set-up

Based on previous days’ analyses, The GBPUSD presented a Short trade opportunity earlier today. I entered a Short position. While the trade is currently on, I’ll like to give an update on the higher time frames analyses, and also explain the few steps I’ve taken so far in managing the Short trade:

On the Daily chart above, price, eventually, broke the support level @ 1.6430 (which we’ve highlighted using the lower blue broken line) downward. Also, we now have a valid negative MACD Divergence (which we’ve identified using the red dashed lines on the upper and lower windows of the trading platform) as MACD closed below its Signal Line yesterday. With these actions, we should expect a possible sustained downtrend that might last for days, weeks, or longer – suitable for longer term traders.

On the H4 chart above, price recently broke the most recent swing low @ 1.6430 (which we’ve highlighted using the blue broken line). This break helped to sustain our bias for a downward price movement. The white horizontal line @ 1.6514 highlights the most recent swing high, and as long as price stays below it – in the absence of any new and lower swing high – our bearish or downward bias remains intact.

On the Hourly chart above, price formed a tradable pattern of lower highs and lower lows with the most recent Hourly swing high @ 1.6499. Price temporarily bottomed @ 1.6389. However, I observed a waving +ve MACD Div. (NOTE: not yet valid) that signaled the possibility of an imminent upward price movement. The signal was a warning to manage the trade conservatively.

On the M5 chart above, we have a clearer view of the Hourly price action. With strong confluences of resistance levels around the fib. 61.8% ret. level @ 1.6457, and the fib. 78.6% ret. level @ 1.6475. I decided to place a Limit Order between both levels (so as to enjoy a better reward:risk while taking precaution against being too far away from the first potential reversal level).

Price happened to reach the "in-between" level exactly, and reversed favorably (it doesn’t always happen that way). As price triggered the Limit Order and reversed almost instantly, and bearing in mind the Hourly waving +ve MACD Divergence and the BOE Inflation Report about to be released, it was a great opportunity to quickly turn the trade to a NO-LOSS trade: As price moved further downward by over 10 pips, with a bearish reversal candle about to form on the 15min chart (Pls NOTE it’s better to wait till it’s formed), I exited half of my position, and subsequently moved my Stop Loss a couple of pips above the reversal candle, which was less than 10 pips away from my Entry Level.

Currently, as I’m writing this note, I’ve been stopped out with a few pips in profit. I took a very conservative trade.

You could’ve have managed this trade in a completely different way. You could have made more profit, lost, or even still be in the trade as price is yet to move anywhere close to the most recent Hourly swing high which was the initial Stop Loss level.