I'm seeing a potential setup on the EUR/USD daily chart tonight that might turn into a trading opportunity for me.  The pair is at a major rising trendline, and is respecting the trendline... so far.  Here's the chart:

The prevailing trend is up, so I'm still bullish and expecting a bounce. If the pair bounces, I'll catch it near the bottom of the channel with a long position. However, I'm ever-aware of the possibility that the uptrend may be running out of steam, and we could see a breakdown. It's at a key turning point, and I expect the next day or two to tell us which way she's headed.

Too many times in the past few months have I thought "pair ABC looks like it may break the trendline and really take off" or "we could see pair XYZ bounce nicely off of that trendline and move in the opposite direction", only to come back in the morning or after work and find that the pair did in fact move as I had anticipated and I had missed a large portion of the move.

Of course, this is the risk I run trading longer timeframes and choosing to sleep and go to work every now and then.  I accept the fact that I will miss good setups from time to time, but I think I can do a better job of catching some of the moves.

Tonight, I see another possible move shaping up on EUR/GBP, but this time I will be prepared.  Check out the daily chart of this pair below.  After a nice uptrend that lasted several months, we saw a lower high in late January, followed by a trendline break last week.  I missed the opportunity to short the trendline break.

Over the past day or so following the trendline break, the pair has retraced significantly, presenting another possible short opportunity.  If we zoom in to the 4 hour chart, shown below, we see that the pair is approaching the falling trendline.  Rather than wait for a bounce, I'm going to be proactive and anticipate a bounce off of the trendline by entering a short order just below near-term support around 0.8980.

So, if the pair bounces and moves south, I'll catch the train.  My initial stoploss will be just above near-term resistance and above the falling trendline.  We'll see what happens.

• Short Entry:  0.8980
• Initial Stoploss:  0.9087

Edit 2/5/09 8:15 AM:  My short order was hit yesterday and the pair made a nice move in my direction, stalled a bit, and is now continuing its move south.  I took profit on half of my position at 0.8863 for a profit of 117 pips (just over 1R).  I'm letting the other half of my position ride until the trend turns around.

Edit 2/10/09 10:55 AM:  The second half of my position was closed this morning as the pair rallied above resistance where my stoploss was placed.  Out on the second half at 0.87821 for a profit of 197.9 pips. 

I've entered a long position in AUD/USD tonight, counting on a bounce off of a rising trendline on the daily chart.  The pair has been moving mostly sideways to slightly up for the past few months.  Today the pair appears to be bouncing off of the slightly rising trendline connecting lows back to late October 2008.

Also note on the daily chart below the overhead resistance of the falling trendline going back to early January 2008.  I'm looking for the pair to retest that trendline, at which point I will have taken my profit on half of my position, and moved the stop on my other half to breakeven.  That is, if all goes as planned!

You can see the bounce off of the rising trendline a little better on the 4 hour chart, shown below.  Also, you get a better sense of how much room I have to work with before we hit the falling trendline.

So I'm long AUD/USD.  We'll see where this thing goes.  I'm counting on it moving up, but I could be wrong.

• Long Entry: 0.63695
• Initial Stoploss:  0.6240

Edit 2/4/09 10:20 AM:  Ok, so I feel like a bit of a dufus on this one.  My entry was correct, and AUD/USD made a nice move up after I got on board, but I failed to take profit on half of my position last night when my profit was at 1R.  Overnight the pair took about a 150 pip drop in an hour and took me out of my position at just over breakeven.  So, while I should have been able to bank some pips, I walk away with only 12.9 pips on each half of the trade.  That's ok, though - this is just a reminder that I need to stick to my rules.