The Daily Trade – Day 21

Filed under: Learn Forex Trading |


Trade Number 21 – USD/JPY 4 Hour Chart


Figure 1.

There was another nice trade on the USD/JPY pair a few days ago which I again missed due to my move back to the UK. It comes amidst the extreme market volatility that we have been seeing, but as long as we implement our methodology of using price action signals at areas of strong support and resistance, then this shouldn’t matter too much. In fact, it allows trades to be closed quicker and therefore in theory, we should be able to make even more profits.


Figure 2.

If you first look at the daily chart (see Figure 1.), you will see that the pair rotated back up to the support/resistance zone that I had drawn in. This level had already held firm on three different occasions, and there had been a change of polarity. You can also see that the long term trend is bearish. Price penetrated this zone, but it could not close above it. If you now look at the 4 hour chart, you will see more clearly that a nice strong bearish engulfing pattern emerged at this level, which was our cue to enter on the short side. The stop loss would have been above the high of the move, with a target of two times our risk, which is always my minimum reward level.


Figure 3.

If you now fast forward in time and look at Figure 3, you will see that price moved back down very nicely on the 4 hour chart, with a couple of pin bars along the way, confirming the bearish move. We would have reached our target of 2% of our bank very nicely after four trading days or so – for a very nice profit. This type of trading can last anywhere between a few hours and a few days, so some patience is needed. Well, that’s it for now, and I’ll be back on Friday for another trading example.

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