Well our winning streak has come to an end after we were stopped on USD/JPY last night. We had the right idea as the market eventually went our way, but unfortunately I made a crucial mistake of forcing the entry. Time for me to take my medicine and review the most basic tenet of technical analysis â�,��"What was support becomes resistance, and vice versa.â�,�  The hourly trend channel from which we were formulating our long strategies is shown in the hourly chart below. You will notice that price popped its head through the channel resistance on about May 15 to trade to an approximate 111.00 high. Now, the next step is for price to reverse and trade back down to the formation which previously served as support, but this time price will use the same formation as support. Our job is to find the exact intersecting point of support and price to place our entries.

My mistake is highlighted in red. The 1.0 Fib projection combined with the .786 Fib retracement aligned nicely at 109.65, but one important piece was missing from the setup: the former channel resistance now serving as support. The proper entry is shown in yellow, which also finds Fib support. The combination of Fib and channel support offered a beautiful and complete entry at 109 and change, not 109.65. The real mistake was forcing the entry. Patience was required to place bids so far below the market, but technically it was the right thing to do.

I dwell on this for our educational benefit. Traders make mistakes every single day, so our goal is to minimize those mistakes that will maximize our profitability. Admitting our mistakes is the first step to profitability, and then next will be to learn from them.

Todd Gordon is a Technical Currency Strategist and Fund Trader with GAIN Capital Group.

Disclaimer
The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.