If you're wondering how to trade this pair, wonder no further. GBPUSD has been very choppy lately. While we are expecting GBPUSD to be in a rather bearish position, the choppiness of the market may be confusing your entry.
This trade is placed on looking to profit from an accelerated movement downwards. As you can see, price rises and then stalls, giving the trend-line quite a test. This is a good sign for us because there has been no sharp break-out above the trend line. If there is a sharp break-out above the trend-line, then we would take the other side of the trade or wait for a better short option. After buy orders have been filled, the market can either continue buying or close out the buy orders. Since buying hasn't pursued for quite some time, we are trading the momentum of buyers closing out their longs and new sellers entering in. So why sell so early?
The sell is rather early is because we want to maximize our profits. This next chart shot shows where our profit target is at. If we enter a trade now rather than wait for confirmation, the reward to risk ratio is much higher. This is because the stop out of this position is simply anywhere above the trend-line. The closer the entry price is to our arbitrary point above the trend-line, the better because it minimizes our risks.
