Trading the GBP USD daily Chart with ADX and Trend line

Forex Trading is considered to be one of the most profitable business in the whole world. Surprised with the word “business”? Well, the most successful trader who enjoys a high standard life by Forex trading treats this as a business. But there is hard truth behind Forex trading. Very few traders can actually become a professional trader in real life.

GBPUSD is one of the most widely traded currency pair in the world. The trending popularity of the GBPUSD pair is due to the fact of low spread compared to its movement and less noise in the course of price action.

 

GBP USD daily chart

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Figure: Trading GBPUSD with ADX and trend line

 

In the above figure a trend line is drawn with the higher low of the current prevailing uptrend ascending towards the resistance. Trader make sure that the trend line is drawn with minimum three point connected to each other. Once the market reject the key resistance for the final time it breaks the short term up trend line and forms the new bearish trend. ADX helps to identify the establishment of a new bearish trend.

 

Trading condition and entry signal

  1. The pair should be trending and price must be near to the key support or resistance level. This is very the first condition of trading the GBPUSD daily chart with this strategy.
  2. Traders must draw the key support or resistance area in the daily chart .The support or the resistance zone should be tested twice at least.
  3. ADX indicator should be used with its default value. When the green line cross above the red line it means uptrend is in action and when the red line cross below the green line it means the bearish trend is in action.
  4. The black line in the ADX indicates the strength of the trend. Before considering the black line the traders must confirm that a prevailing long-term trend is present in the market which going to bottom or tops the price.
  5. As soon as the redline goes above the green line along with strong trend momentum trader can expect that the breach of current line support will be broken.
  6. Traders take their short entry with a valid break out of the trend line with a stop loss above the last high made by this pair. This trading strategy is extremely profitable when there is chance of imminent trend reversal.
  7. While taking any trade using this trading strategy proper money management system should be followed. No system is 100% perfect. Hats why professional trader use money management technique to save their hard earned money in the forex market. Never risk more that 2-3 % of your account equity and trade within in your risk tolerance level.
  8. Before taking this system live in to market its advices that trader use this technique for at least two month with virtual dollar provided in the demo account. Even all the professional traders also switch to demo trading before making any change into his trading strategy.