Alright, another nights trading has gone by and now we have a potential trade setup.

First, though, lets go over last night. In case you have forgotten, we sat on the sidelines last night, so for us there was no trade. Now, to give credit where credit is due.

For the traders who did go short at 1.8830 and played the 50 pip profit, they closed their trade within 1 pip of the low of last night. Very impressive trading and I applaud all of you.

However, there was even a better trade taken last night, and of course this trader was sure to let me know about it.

Instead of playing a breakout to the upside of yesterdays consolidation, he went short at the top of the range. In fact, he took his short at 1.8880. If you look back at the yesterdays trading, youll see just how impressive this is.

Now, dont misunderstand what I am saying. I am not taking any credit for this trade. In fact, I am using this to show you that any of you can outperform my trading. I say this very proudly, because my goal is to teach you well enough so that I am the worst trader in the room, but I still make the money I make now.

Lets move onto tonights trading outlook.

Since we have continued in our downtrend, we will only be looking for short trades. While in this type of trend, there are two ways to enter into a trade.

One, to enter the trade on a bounce up to a good resistance level. By using this method, you limit your risk and you limit the number of trades you will enter. However, if you can accurately find these trades your profit can be substantial.

Secondly, you can enter trades as price breaks below any previous low. In our case, the low to watch right now is 1.8742 (according to our charts with GFT). This trading method leads to more trades but more risk. However, in severe downtrends you may not get a bounce that will allow you to enter a trade in the first method described in the previous paragraph. By using this method, selling as we break the old low, you position yourself to get short even in the strongest down trends.

Both of these methods have merit and can be traded with great success. Which one you decide to trade will come down to your trading style and preferences.

Some traders will use both of these techniques at different times.

Why do I tell you this? I want to get you into the habit of looking for patterns in trading. I want you to recognize how Cable responds after periods of consolidation, or trends.

This way, you can use this information later in your trading.

Tonight, we see some resistance at 1.8830, and 1.8860 and 1.8880. Any of these levels can play an important role in tonights trading. Its important to pay attention to price action at these levels.

Also, we will keep an eye on what happens if Cable breaks below that 1.8742 low from yesterday.

1.8700 can play a role as support, although we wont be looking for a long trade tonight. This may be a good place to put your profit targets.

We find these support and resistance levels using a set of technical indicators and other variables that we have found to be most successful for us. We use several other indicators and a variety of technical analysis techniques to enter and exit all of our trades. Every trader will have a different combination of indicators that makes the most sense to them. Learn how to develop your own successful Forex Trading style with our Elite Forex Trading Course or Forex Seminar.