GBP/USD Breaks On The Short Term Intraday Chart

As discussed in the morning commentaries over the last few days, sometimes when choppy trading exists, it is best to follow shorter term charts.  Above is the 5 minute chart today.  The market has been consolidating at the bottom.  There have been 3 tests of the 100 bar moving average.  On a couple occassions, the price moved above but quickly failed.   However, the last move broke through at the 1.4222 level and moved to a high of  1.4275.

The decision for traders now, is does the market go higher from here or should you take profit?  The answer is largely up to the individual trader.  One way to play it is to put a stop if the price moves back below the moving average.  This can end up with no profit (especially if the market is in a illiquid phase with choppy market conditions), but keeps the trader in the trade if the market decides to trend higher (most money is made when the market trends for extended period).

The other option is to calculate a retracement profit target.  In the chart below a Fibonacci Retracement of the move down comes in at the 1.4268 level. This level was reached, so profits can be taken and the next trade can be looked for.  There are other profit targets that can be employed such as other moving averages like the 200 bar moving average (green line in the chart below).

The point is, if the market is going to be volatile, prepare for volatility.  Try to jump on some moves that make the most sense (like a MA break after a number of tests), and if you do, your trading should benefit

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