The Daily Trade – Day 11

Filed under: Learn Forex Trading |

Trade number 11 – USD/JPY Daily Chart

Today, I’d like to talk you through a trade on the USD/JPY daily chart which set up at the end of May this year. As you can see from Figure 1, price had been moving down strongly during April before rebounding off at the beginning of May with a strong pin bar. Price then retraced after a bullish engulfing pattern, before returning to an area of support/resistance which was tested briefly in the April bear move (see the long bullish engulfing pattern followed by an equally long bearing engulfing pattern at the green zone at the end of April?). At this point, we should be waiting for any price action signals that might tip us off about a further move down.

Figure 1.

A nice doji candle emerged, which was also an inside bar. This shows that there was indecision in the market and that a turn might be on the cards. This was followed by a strong bearish engulfing pattern, which was our signal to sell short. There was around two times our risk until the next logical support level (the pin bar at the beginning of May), so we could have entered with a risk reward of 1:2, which is more than acceptable.

Figure 2.

Now, as you can see from Figure 2, price did indeed continue to move down until it reached our target at the green zone. It then bounced off this level again and a bullish engulfing pattern formed. This highlights just how important support and resistance levels are in forex trading. You can see that this pair was beginning to get stuck in a sideways range, and we should have been continuing to look for any price action signals at the extremes of this range. Well, that’s it for today and I will be back tomorrow with yet another daily chart trading example. Until then… happy trading!

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