The Daily Trade – Day 22

Filed under: Learn Forex Trading |

Trade Number 22 – GBP/AUD 1 Hour Chart

There was a nice trade on the GBP/AUD chart a couple of days ago with a nice bearish engulfing pattern setup.

 

Figure 1.

If you first look at Figure 1, you will see that the overall long term trend has been down on the pair, but there have been several retracements along the way. There was also a nice support zone around the middle of the chart, which was bounced off three times before a false break penetrated it and continued back down. Recently, there has been a large retracement back up to this area, with very strong momentum. However, with the overall long term trend being down, we should be watching this strong area for any price action setups.

 

Figure 2.

If you now look at figure 2, there was a nice long pin bar at this key area, followed by a nice long bearish engulfing pattern. If you’d decided to go short here, your stop should have been a few pips above the high of the pin bar. Your target could have been at least two times the risk – so let’s say for the sake of argument that we are going for the minimum of a 2% gain on our bank. This would probably be the best decision anyway as there is another support/resistance zone below, and we should not really set our target below this.

 

Figure 3.

If we now fast forward to Figure 3, you will see that price did indeed move back down, and we would have just about reached our target of two times our risk in just over twenty four hours. You can also see how price started to move sideways as it approached the next support/resistance zone. Tin summary, this would have been a nice quick profit and a 2% rise on our bank. I’ll be back with more price action trading on Monday. Until then – have a good weekend!

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