The Daily Trade – Day 10

Filed under: Learn Forex Trading |

 

As all the trade examples from “The Daily Trade” have been on 1 hour and 4 hour charts so far, I am planning to provide some examples for the daily charts over the next few days. The reason why I have focussed on examples on the 1 hour and 4 hour charts is so that you can get the results quite quickly, usually the same day or the next day at the latest. However, the daily chart trades can take much longer to find a resolution – sometime weeks! Anyway, these daily trade examples will be all past trades which you can find in the MT4 historical data. Today, I will begin with a trade example on the GBP/USD chart.

Trade number 10 – GBP/USD Daily Chart

 

So for the daily charts, we find the levels of support and resistance in the same way, but instead of zooming in to the 1 hour and 4 hour charts to find price action signals, we wait for the same kind of signals on the daily chart. Here (see Figure1.), you can see that a very strong support level formed around the end of August/beginning of September 2010. Price then returned to this level in December 2010 and a very nice bullish engulfing pattern emerged.

Figure 1.

We could have taken this trade at the close of the engulfing pattern. The next logical resistance level was around two times the length of the engulfing candle away, so we could have taken a nice 1:2 risk reward ratio, with our stop being at the low of the move.

Figure 2.

Now, if we zoom forward to February 2011 (see Figure 2), we can see that our target would have been met, and in fact, price continued to go up long after our target had been met. This would have been a very nice trade on the daily chart, but we would have had to wait over two weeks for the trade to be resolved. I will be back with another daily chart trading example tomorrow.

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