Live Trade Number 20 – ANALYSIS and RESULT

Filed under: Live Trades |

Well, this trade caps off a bad start to 2012, as we have yet another losing trade, this time on the USD/CHF forex currency pair. However, the good news is that we are still in profit even after the bad run, and our ‘Live Trade Number 21’ is doing very well as we speak. These drawdowns are a part of the game, and we must learn to deal with them. Anyhow, I’d like to talk you through my reasons for taking this trade right now.

 

Figure 1.

If you look at Figure 1, you will see the daily chart for the USD/CHF pair. At the top of the chart, you will see that I have marked in a green horizontal band. This is to mark it as a significant area of resistance and this is where we should be looking out for any price action signals on the daily and intraday charts. On this daily chart, you can also see that price has moved outside of the extreme upper line of the Bollinger band, and that there is a divergence with price on the RSI indicator.

Figure 2.

 

Next, Figure 2 shows the 4-hour chart for the USD/CHF pair. You can see that a nice bearish engulfing pattern formed at our area of resistance, so I put an order in here with a stop loss jut a few pips above the high of the move to allow for the spread, and a target of two times our risk.

 

Figure 3,

However, Figure 3 shows that once again, this trade did not come off and our stop loss was hit. Although this looked like a very nice setup, it was against the recent trend and this is sometimes a dangerous play, as it proved to be. I do not take too many counter-trend trades; but sometimes, the setup is just too good not to take and hopefully, in the coming weeks, you will see that these setups are well worth taking over a long series of trades.

 

 

Trade 20 = -103.28

 

Total Profit/Loss for test = +192.10 GBP

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