The GBP/USD broke out, too.  It is on its way up, I suppose, all the way to the 100% extension of the width of the original channel.

How far down the channel hole do you want to go?  I strongly encourage you to get in the habit of drawing winnipeg lines on the outside of your channel.  Here’s an update on our USD/JPY trade (that was already closed, see below), and you can see how the Winnipeg lines really help with profit targets.

Frankie went to channel school and dropped out.  The Winnipeg lines worked perfectly for profit targets.          

CAD/JPY.  Top rolled down.  Tunes playing.  Hair slicked back and those Ray-Bans on.

It’s classic support and resistance time.  If the pair closes above the blue trendline, I’d be gearing up for a buy trade — I might wait to take it, as in wait until it actually closes above and then jumps back down to touch the line (a Winnipeg move).  Profit target would be the 119.67 area, a recent high.  Stop loss below that hammer-looking candle on the far right — underneath 118.00.

Well, I’m glad I am not the type of person to be so enamored with one trade plan that I can’t be flexible.  The pair closed below the bottom of the channel (= sell trade, like we talked about) and then it closed back inside the channel.  Stopped out!  Fast and relatively pain free, as long as the plan was followed.

That close back inside the channel, leads to a buy trade, which is still open and the pair is near the top of the channel.  Not a bad time to close it.  This brings up a good point about letting myself be wrong about direction (I was way more excited about the sell trade than the buy trade).  It’s not important to be right.  It’s important to be solvent.  I guess now is a good time to go ahead and take profit, since the pair is near the top of the channel and that seems good enough.

Today we had lunch with Francesc Riverola, the CEO of FXStreet.com, here in Barcelona.  During lunch we had a great conversation about what holds so many traders back from being successful, about brokers, about short and long term trading, about traveling in Europe, and about trading with friends.  There were seven of us; from totally diverse backgrounds, but all of us love trading.  We didn’t solve any quadratic equations, or bring peace to the Middle East, or figure out the magic method of trading.

We just had a good time talking about trading.  If you haven’t gotten together with fellow traders for a while, do it.  If you don’t know any traders, jump online and go to the discussion boards and post an entry about getting together with traders in your area.  There’s something fantastic about getting together with people who are positive, who are working hard to help each other, and who like to laugh.

It’s not my favorite currency pair but it did play along with our plan.  The pair easily made it down to the 150% extension (Winnipeg line) outside the channel.

Hey!  The pair is at the bottom of our channel.  I’d love to see this current candle stay a "doji" style reversal candle and then buy the pair. Stop below the bottom of the channel.  And I’d still sell the pair if it closes below the bottom of the channel (in fact, I am secretly more interested in a close below the bottom of the channel for a sell than I am about the buy trade). 

New channel.  I would very much like to sell it on a close below the bottom of the channel, or buy a bounce up off the bottom of the channel.  I am giong to think of some more ideas about this pair and the channel a bit later.

The pair broke out and closed below our 4 hour channel.  I would not be suprised to see the pair rise back up and touch the bottom of the channel all over again, and that seems to me to be a nice place to sell the pair.  The stop can go right inside the channel (if a candle closes inside, I’m out).  The profit target would be the farthest Winnipeg line we can see on this chart — the 50% extension outside the channel.