Filed under: Learn Forex Trading |

Trade Number 18 – GBP/USD 4 Hour Chart

As the world financial markets are in turmoil once again, this has been making the forex charts a little choppy and volatile. However, there was a nice setup on the GBP/USD chart that we could have taken.

 

Figure 1.

If you take a look at figure 1, you will see a nice support/resistance zone which I had drawn in at the 1.62581 level. This had been used as both support and resistance on a number of occasions in the past three months or so. This had also been used as a strong support level over the past eleven trading days, so we should have been watching this level very carefully (but I wasn’t as I have just moved back to England!). If we zoom in to the 4 hour chart, we can see that price bounced with great momentum at this level on two separate occasions (see Figure 2.). And if we go back further, it was also bounced off with a bullish engulfing pattern, so it is a very strong level.

 

Figure 2.

After another move down, a nice pin bar emerged followed by a bullish candle. This was our signal to get in. We could have set our stop loss at just below the low of the pin bar, and gone for a reward of two times our risk. If you look at Figure 3, you can see that price did indeed bounce off this level again and we would have reached our target for a 2% gain on our bank. This is yet another good example of price action trading using key support and resistance levels. If you enjoyed this trading example, then why not drop by again tomorrow when I will go through another trade. Until then, happy trading and good luck!

Figure 3.

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