Intersecting Lines of Interest

Any technical analysis tool is designed to identify the price level, with the greater probability of representing a future market turning point. Any trend line or indicator used on its own may only produce a 50% rate of accuracy.

However when multiple lines indicate a similar price level and trade theory, then our chances of being accurate may increase dramatically in our favor. For example, we can see based on the following (1-hour) chart, the GBPUSD recently broke down below a common trading range. During these consolidating ranges, traders may adopt a simple buy low, sell high approach. Most recently we can see resistance emerged in the form of a ‘double top’ pattern, which occurred very close to the longer term 50% Fibonacci retracement level. In addition, due to the fact that the overall trend appears to be to the downside, those trading with the trend, may choose to maintain at least a small position in the hopes of greater profits as this trading range turns once again into a trend.

Adam Rosen, FX PowerCourse Instructor
FXCM