If you are a regular reader of our articles, you will know that we like to demonstrate our theory with some live examples, so you can see the theory in a real market situation.
We did 3 live examples recently. We had a great profits in the yen and pound and a loss in the euro but a good profit overall â Now lets look at another example.
The British Pound V US Dollar
We hit this from the short side and took profit above the middle Bollinger band and prices are now moving up from this level to test resistance.
There is another opportunity on the short side that offers great risk to reward.
Lets look at why.
Pull up a chart of the British Pound.
A good free service to use is futuresource.com.
Prices are moving up to test the recent double top and we think this resistance will hold.
Only a close above January’s high will change our view, we would in this instance have a breakout to the upside that would indicate further strength.
Watch prices into the double top and look for the bears to take control.
Keep your eye on a falling RSI into this level and a cross with bearish divergence on the stochastic.
At present price momentum is up and for shorts to get the nod we must see momentum turn bearish.
At present both stochastic lines are pointing up.
We want to see the lines cross to the downside near the double top with bearish divergence, then the odds favor a price drop.
The stochastic increases your odds of success, as it confirms price momentum is changing and you don’t have to guess ie you act on confirmation.
If you don’t know how to use this great timing indicator, see our other articles.
The target again is just above the center Bollinger band.
Do not try and predict.
Wait for the indicators to signal the bears are taking control, via the stochastic and RSI and remember the bulls only take charge above January’s highs.
This trade has low risk good reward by selling the top of the range that has held for a long period of time.
This is a simple swing trading method but it works and uses price momentum to increase your chances of success.
Try swing trading with this method and you will soon be spotting some great high return low risk trades, with clearly defined stops and targets.