In addition, today’s price action has once again failed to breach the highs of the last two days, adding further weight to this analysis, and having seen 9 straight days of gains, the rally now looks to be running out of steam at the psychological level of 1.6000. Immediately ahead is a deep area of price congestion, and this has added a further layer of negative sentiment to the daily chart.

From a fundamental perspective, the recent strong move higher for the British pound was largely fuelled on an expetation that interest rates would rise sooner rather than later, following the increase in headline inflation which is now ell above 3% and looking set to rise further. Indeed the same sentiment was behind the recent surge in the euro, with Trichet’s comments regarding a rise in rates last week sending the euro surging as as result against the dollar. Since then, in the UK, the realisation that the prospect of a rate rise seems less likely has seen the pound pull back, and with the the dollar index now looking to recover following yesterday’s doji candle, this looks an excellent set up for a firm move lower in the next few days, and as such is my forex top tip for today.

Elsewhere, the pound is strengthening against the euro which has sold off early in the London trading session, with the long legged doji candle of Friday, giving a clear signal of short term bearish sentiment for the pair, which has been validated so far this morning, and any move lower today could see a test of support in the 0.8300 region, with a breach here opening the way to a test of the 0.8200 platform in due course.

The recent bullish trend on the GBP/CHF continued once again last week, breaking above all three short term moving averages, following the strong bullish engulfing signal of early January which gave an excellent trading entry point on the daily chart, and provided we see the 9 day moving average cross the 40 day moving average, which is now imminent, then this would provide a further degree of confirmation for the move. This morning’s price action has cleared resistance in the 1.5300 area which should also provide a further level of support to the move higher for the pair in due course.

The reason many traders refuse to use a stop loss, is simply that as humans we are naturally optimistic, and are programmed to have a positive outlook on whatever we do, and this is the same in trading, which is why accepting that our analysis of the market was wrong, and allowing the market to take us out of a position is so hard. However, to become a successful trader, this is a mental barrier that you must overcome if you are to succeed. The reason is simple. A stop loss, whether a manual one or a trailing, will keep your losses small, and provided you are also able to allow your profits to run, then ultimately you will be successful as a trader. Trading is about mental strength and this is one of the key skills you have to learn, which is to master your own emotions. If you cannot accept a loss, then trading is not for you, but if you can, and see this as a step closer to a winning trade, then you have made the mental step change that will ultimately help you succeed in the toughest of all markets. So for today, my forex top tip is never trade without a stop loss – short and simple – unless you are hedging in another pair or market, but that’s for another post!