The Daily Trade – Day… 50!

Filed under: Learn Forex Trading |

Trade Number 50 – NZD/USD 4-Hour Chart

 

Well, here it is already… day fifty of “The Daily Trade”. That makes today our fiftieth trade example. Doesn’t time fly?

 

What I have for you today is a trade on the NZD/USD forex pair, which is often considered to be one of the ‘major’ pairs – so there is very good liquidity on this pair and some strong levels of support and resistance.

 

Figure 1.

If you first look at the daily chart (Figure 1.), you will see that there is a very obvious long-term trend in place. You will also see that price doesn’t move up in a straight line, rather, it periodically steps back. So when price stepped back once again and approached a key area of support/resistance, we should have been on the lookout for any price action signals on the daily, 4-hour, and 1-hour charts (incidentally, I haven’t been taking many trades recently because since I moved house, I’m having to wait 15 days for the good folks at Sky to come and activate my broadband account!).

 

Figure 2.

If you now look at the 4-hour chart (Figure 2.), you will plainly see that price moved back down to this key zone and tested it with a pin bar (a bit like dipping your toe into a hot bath!), before moving back up and creating a bullish engulfing pattern (a bit like deciding that the bath was a bit too hot!). This would have been a great entry point for getting in on the long-term trend, with a stop loss just a few pips below the low of the move.

 

Figure 3.

Figure 3. shows that price did once again test this key zone, but the water was still a little too hot and our stop loss would not have been compromised with this. We could have made a 2% rise on our bank with a risk-reward of 1:2. That’s it for today – more tomorrow.

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