Trading British Pound currency futures for fifty-one pips with entries at the Average True Range stop. The risk on each trade was only ten ticks.
First, just about every timeframe on the British Pound was saying down with the exception of the 180 minute chart (the 45 minute chart indicated the bounce was complete see below). However, although we anticipate a bounce off the Average True Range stop, that had occurred during London. The 720 minute chart had barely managed to flip the ATR stop and a test of the ATR that was now blue was anticipated. Additionally, the daily chart was very close to the Average True Range stop after a magenta peak.
Trading British Pound Currency Futures – Entry Setup
Then looking at the 45 minute chart, price had reached up to the red average true range stop, after a magenta peak, but was unable to break it. I entered as the bar was closing at 9am New York time. I used the aggressive stop on the three minute to trail profits. The entry on the first trade was 1.4333 and the exit was 1.4314. Then the three minute makes an ADX magenta peak, retraces back to the ATR as anticipated and I enter a second trade. The entry on this trade was 1.4304. During the trade a wide bar appeared. Knowing that they typically retrace, I opted to trade cautiously and take profits instead of waiting around to see what happened.
While only risking ten ticks per trade, the combined profits for these two trades was fifty-one pips. Since a combined risk of twenty ticks was used, using that to calculate risk to reward for the trade, the risk to reward was 1 : 2.55. With today being a Fed Announcement, I was more cautious than normal as the markets do tend to spike on these days. The tick value on the British Pound is $6.25 per tick. Profit for the two trades based on the tick value was $318.75 per contract traded.