Interesting Technical Pattern

[dc]C[/dc]urrencies have been difficult technical trading for the past several quarters. This is partly due to the nature of currencies—though there is a lot of TA lore about currencies trending fantastically well, they also go through really choppy periods. Though currency prices are set by supply/demand just like any other asset (the supply/demand of the relative currencies, in this case), supply and demand are both driven by a host of other issues: trade, interest rates, speculative concerns, etc. In many ways, these are the most difficult technical markets on intermediate timeframes, but, patterns still hold.

One of the classic pre-breakout patterns is a series of higher lows into a defined resistance area. We can see this clearly on the chart of the GBP/USD above, suggesting that any breakout above February’s high should have good potential. How to trade? Many answers here. In my published research, we have been long the GBP a while, so it is possible to position pre-breakout. Some trades may wish to enter on the breakout, but there is a tradeoff between aggressive entries, which will often turn out to be entries in fakeouts, and giving up trade location for confirmation. Other traders may wish to avoid the breakout entirely, and position in the first pause or pullback following. All of these choices can make sense, as long as you understand your trading personality and investment mandate—have a set of rules, and follow them.

Keep an eye on the GBP to see how this pattern resolves over the next few weeks.


Adam Grimes has over two decades of experience in the industry as a trader, analyst and system developer. The author of a best-selling trading book, he has traded for his own account, for a top prop firm, and spent several years at the New York Mercantile Exchange. He focuses on the intersection of quantitative analysis and discretionary trading, and has a talent for teaching and helping traders find their own way in the market.

This Post Has 2 Comments

  1. Okahira

    Hi Adam,

    I am glad I could read a new post for the first time in 3 months.

    I was afraid that you were sick or something.

    btw I’m your course member. I especially like “What works and does’nt work in TA.”

    Since I watched the video, I have tried not to rely on MA as much as possible.

    Looking forward to week 8.



  2. A_Joe

    Hello Mr Adam,
    Nice to hear from You again.
    Wish You Great time ahead ! TC

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