Live Trade – GBP/USD

Filed under: Live Trades |

I had a very simple trade come off on the GBP/USD forex currency pair yesterday. You can see the result of this trade on my FX account at:

 

http://www.myfxbook.com/members/jjrgaskell/daily-trade/357261

I would like to talk you through this setup right now, so to begin with, take a look at Figure 1. This is the daily chart for the GBP/USD currency pair, and this is the only chart that we will need to look at for this setup as we are not using the intraday charts for this one.

 

As you can see, there seems to have been a change in market sentiment lately for this one. The 8-day exponential moving average has crossed below the 21-day exponential moving average, signalling that the market has turned bearish. As it is best to trade with the current trend (and I largely gauge the trend by the moving averages), I was on the lookout for any price action signals that confirmed this bearish momentum.

 

I have highlighted the candle on this chart that is of most interest to us. This I what we call a pin bar, which is short for ‘Pinocchio’ bar. It is called this because it has a long nose like Pinocchio, and it is lying in the sense that it is duping traders into thinking the market is turning bullish, but it then reverses and moves back down.  I put an order in here to go short at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the pin bar, and with a target set of two times my risk. The order was filled and 70% of the lots were taken off the table, leaving the other 30% to run. With a risk of 1%, this would have got a profit of 1.3%, but as this account is risking 2% per trade, the reward was a 2.6% gain on the original bank of 5000 GBP. That’s all for today – more tomorrow.

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