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USD/CHF breakout trade

Discussion in 'General Forex Talk' started by Ricex, Mar 1, 2010.

  1. Ricex

    Ricex Sergeant

    Jun 30, 2009
    Likes Received:
    hope some of you have profited from the great cable move today. Cable is dead, long live cable.

    ....anyway just thought I'd show you one of my other trades today, no great bank buster really only 50pips but it illustrates market states quite well.

    So on the chart we can see the range or consolidation of the price. We know it's consolidating because we are not seeing price make higher highs higher lows, as in an uptrend, or lower highs lower lows as in a downtrend. It is caught if you want within bounds.

    The market can do one of three things, move up, move down, or go sideways. For me the important thing is to first identify what the market is doing, and then trade accordingly.

    usdchf trade 10310.

    Price will try and breakout of the range and move higher or lower and we can obviously profit from this, but we need to filter against false breakouts which can happen quite a lot. False breakouts are simply price having a half hearted attempt at moving out of the range and then falling back within it.

    There are several ways of filtering FB's, one is to let price move outside the range and then comeback and use the previous resistance as support. This doesn't always work as happened to me today. The first break to the upside, broke range by 10pips, then came back to test, I placed the trade and then the price folded back in resulting in a 10pip loss.

    Nothing ventured nothing gained.

    This first attempt was significant enough for me to mark it as a 2nd point of resistance. So after the price found support on the other side of the range (my ranges have 10% margins) it came back to resistance and after about 40mins broke through 1st and 2nd resistance quite convincingly. A little pullback and the entry was on the line (+spread).

    I was only really looking for 50pips out of this, daily ranges being about 100pips on USD/CHF, could have hung on for more but happy to quit with the plan. This breakout was to the upside but I would be doing exactly the same on the downside.

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