The trade you will see here involves trading inside a bullish channel pattern. The price of the GBP/USD has been following an upward channel and I hopped in after one of the bounces from the lower level. This way I rode a bullish price impulse to the upper level of the channel.
Signals for the Upcoming Bullish Impulse
- The GBP/USD has been following a bullish channel on the 5-minute chart.
- The channel has been tested for 7 times.
- The price initiated another test at the lower level of the channel.
- I traded long on the assumption that the price will increase as it did the other 7 times.
Stop Loss and Targets of the Bullish Channel Trade
I placed my Stop Loss order below the bottom created in the moment of the bounce. This bottom matches with the area around the previous channel bottom. For this reason, I consider this as a support area and a good level for my Stop Loss.
My take profit order stays at the opposite channel level in the moment of the current candle on the chart. With the time passing by and the closing of newer and newer candles, price action switches to the right. Simultaneously, the upper channel level is getting higher and higher. This is why I adjusted my Take Profit order higher after some time.
Live Trading Example
Notice that the price exited the channel for a short period of time. I would have exited the trade under normal trading circumstances. However, the support area above my Stop Loss order sustained the price action. As a result, the price bounced in bullish direction, creating a sharp run to the upper level of the bullish channel. My Take Profit order got hit and I closed a profitable trade collecting 12 pips or almost 0.01% on the capital invested.
I don’t consider this to be the best trade having in mind the time it took. However, it was profitable after all.