The Daily Trade – Day 19

Filed under: Learn Forex Trading |

Trade Number 19 – USD/CHF 1 Hour Chart

 

Figure 1.

With all the volatility in the forex markets at the moment as a result of the current world economic crisis, it is probably best to look at jumping onto strong moving trends by getting in at retracement areas. If you look at the USD/CHF daily chart (see Figure 1.), you will see that we are currently in a very powerful bear market. However, price got a little stuck over the past few days, and created a support/resistance level which could not be broken over four consecutive days. On the fifth day, the market gapped down and opened lower than the support/resistance zone, before retracing back up. This is where we can look for price action signals so that we can get in on the trend and ride it some more.

 

Figure 2.

If we now skip to the 1 hour chart (see Figure 2.), you will see that price moved back up to this zone and formed a nice bearish engulfing pattern. Here, we should be selling short and setting our stop loss at just a few pips above the high of the engulfing pattern. My target, had I seen the trade, would have been two times my risk, which is around the low of the chart.

 

Figure 3.

If you look at Figure 3, you will see that price did indeed continue to move lower, and our target of 2% of our bank would have been met for a nice quick profit. In fact, we could have had profits of four or five times our risk, as price shot down even further. This just goes to show that when the markets are volatile, it is not a time to be scared and step aside, as there are some great price action setups that come off very quickly. I will be back with another trading example tomorrow – so until then, may the charts be with you!

 

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