The first thing I do when analyzing the currency pairs I trade is to us a top down analysis methodology. So to start my analysis I use the monthly chart as shown above. When I do my monthly analysis I open up the chart to show all monthly candles from the current monthly candle and look back to the monthly candles as far back as 3 or 4 years. What I am interested in is the current monthly price action. I am not really interested in what price action did 5 years ago or further back. I want to know what price action is doing more recently.
In the chart I see price action is moving between horizontal support to horizontal resistance. I call these lines Major Support and Major Resistance. It is normal for price action to move between support and resistance and back again. This price action then continues until price breaks out from between support and resistance indicating a change in trading psychology.
Notice that price has bounced off major support and is now heading upward to test Major Resistance. Further notice price is now currently trading mid range between major support and major resistance. I expect price to continue moving higher to test Major Resistance. There is one more thing we need to consider. The current candle looks to be rejecting higher prices as noted by the large upper wick. Normally this would be indicating price is ready to reverse back downward if it would have occurred at an important resistance level. However price is not at a major support or resistance level so here is how I read this candle. This candle opened and moved higher but moved to far too fast so price action reversed back downward to correct for the overbought condition. Once price has finished correcting it should once again move upward to test major resistance.
The next thing to do in my analysis is to move to the daily or 4 hour time frame to look for trade setups. I will be monitoring these lower time frames and when I find a high quality trade setup I will post it here in MY IDEAS!
Note: GBPCAD is one of the 10 most volatile currency pairs.
In the chart I see price action is moving between horizontal support to horizontal resistance. I call these lines Major Support and Major Resistance. It is normal for price action to move between support and resistance and back again. This price action then continues until price breaks out from between support and resistance indicating a change in trading psychology.
Notice that price has bounced off major support and is now heading upward to test Major Resistance. Further notice price is now currently trading mid range between major support and major resistance. I expect price to continue moving higher to test Major Resistance. There is one more thing we need to consider. The current candle looks to be rejecting higher prices as noted by the large upper wick. Normally this would be indicating price is ready to reverse back downward if it would have occurred at an important resistance level. However price is not at a major support or resistance level so here is how I read this candle. This candle opened and moved higher but moved to far too fast so price action reversed back downward to correct for the overbought condition. Once price has finished correcting it should once again move upward to test major resistance.
The next thing to do in my analysis is to move to the daily or 4 hour time frame to look for trade setups. I will be monitoring these lower time frames and when I find a high quality trade setup I will post it here in MY IDEAS!
Note: GBPCAD is one of the 10 most volatile currency pairs.