The Daily Trade – Day 17

Filed under: Learn Forex Trading |

Trade Number 17 – EUR/JPY 1 Hour Chart

 

Figure 1.


There was a nice trade setup on the EUR/JPY chart yesterday on the 1 hour chart. There was a significant level at around 113.859 on the daily chart which had been rejected as support six times around mid-late June. However, price did break through this level at the beginning of July, and with some force, causing a change of polarity at this level, and turning support into the new resistance (see Figure 1.).

 

Figure 2.

As price action traders, we should always be looking for price action signals in the form of engulfing patterns or pin bars for example, at significant areas of support and resistance. I look for these on daily, 4 hour, or 1 hour charts, but I do not like to go lower than this as the signals are less reliable and the spread becomes more of an issue. In this instance, a nice bearish engulfing pattern emerged on the 1 hour chart (see Figure 2.). I actually missed this trade, but if I’d seen it, I would have taken it with a stop just above the high of the move and a target of probably three times my risk.

 

Figure 3.

Unfortunately, on this occasion, we would have been stopped out of the trade pretty quickly (see Figure 3.). There was a false move up just above our support/resistance zone, which would have ended our trade. However, this was very much a fake move, and if you were brave enough, you could have had another go at a short trade, based on the inside bar followed by a fake move with the pin bar. This would have been very profitable, and we could have had four times our risk. However for me, it was not to be. I’ll be back with another trade example next Monday – until then, have a good weekend.

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