Live Trade – AUD/JPY

Filed under: Live Trades |

I currently have a live trade in on the AUD/JPY forex currency pair (the pair for the Australian dollar and the Japanese yen), and I would like to talk you through my reasons for taking this trade right now.

 

Figure 1.

Figure 1.

To begin with, take a good look at Figure 1. This is the weekly chart for the AUD/JPY pair, and I am using it to show you a significant level of support/resistance in this market. The level in question is the horizontal line that I have marked with a green band. As you can see, when this pair was bullish, this provided a good support level, and this level is still proving to have some strength. On the daily chart, you will see that this level has been relevant on a number of occasions.

 

Figure 2.

Figure 2.

Figure 2 shows the daily chart for the same AUD/JPY pair. What you can see is that as price approached this important level of support/resistance, a very well defined bearish engulfing pattern formed, taking out the bullish moves from the previous three days. It was here that I put an order in to go short at a 50% retracement of this bearish candle, with a stop loss placed just a few pips above the high of the move, and an initial target set of two and a half times the risk – although the trade will be managed and profits taken depending upon what price action is telling us.

 

When a strong bearish engulfing pattern forms like this at a significant level of support/resistance, this usually highers the probability that this level will hold, so placing a stop loss here is a good strategy. Moreover, by entering at a 50% retracement, we can effectively improve our risk-reward scenario, and as such, we can now squeeze in profits of 2.5 times the risk before the next relevant support/resistance level comes into play.

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