The Daily Trade – Day 2 (including result)

Filed under: Learn Forex Trading |

Trade Number 2 – AUD/NZD (1 hour chart)

I would like to document a trade that I took yesterday (11th July 2011). It was something of a rollercoaster ride, and demonstrates just how important your stop placement is.

Figure 1. AUD/NZD Daily Chart

I was alerted to the trade when the support/resistance “zone” (the green band) at around 1.28318 was penetrated (see Figure 1.). This was a very strong level, which had held five or six times in the past, including a change of polarity. Once this level had been penetrated, I kept an eye out for any price action signals on the 1 hour and 4 hour charts.

A nice bullish engulfing pattern emerged on the 1 hour chart, which I got in on (see Figure 2). I set my stop loss just below the most recent low, and most crucially, I added on a few pips to allow for the spread as I always do. This turned out to be a vital element of the trade.

Figure 2. - AUD/NZD Hourly Chart

The Result

The pair consolidated over the next few hours before moving downwards towards my stop loss. It came very close to my stop on two occasions, within just a few pips in fact, before forming pin bars and moving back up. At this point, I felt I was in a free trade as I was very lucky not to get stopped out.

Figure 3. - AUD/NZD Hourly Chart

Fortunately, we were able to ride that luck a little bit and the trade came off to the upside for a profit of two times our risk (see Figure 3). In hindsight, I could have made five times my risk, or more, as the pair is still moving up. However, bearing in mind how close we got to hitting our stop loss, this has got to be regarded as a good result. It was a rollercoaster ride, but we got there in the end for a 2% gain on our bank.

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