The Daily Trade – Day 28

Filed under: Learn Forex Trading |

Trade Number 28 – NZD/JPY pair

 

Figure 1.

I was looking through some of the less popular and fluid forex pairs just now and I found a possible trade that I had missed. It came around the 15th August. If you look at Figure 1, you will see that there was a nice change of polarity on the daily chart, with a strong support level which had held five times since June turning into new resistance. There had been a very strong move down recently which broke this level, and when price retraced back up to that zone, we could have been looking out for any price action signals.

 

Figure 2.

If you now look at Figure 2 on the 1 hour chart, you will see that a nice bearish engulfing pattern emerged at this zone. We could have taken a sell trade at this point with a stop loss a few pips above the high of the move to allow for the spread, and a target of two times our risk. I may have been cautious about this one had I seen it as there was a gap up which could act as support, and the previous swing high would also be above our target. So it was not a perfect setup, and perhaps one that I would have just watched. But for training purposes, it is a good one to look at.

 

Figure 3.

If you now look at Figure 3, you will see that our target would have been met. However, we would have been just a few pips from being stopped out, so it was important that we set our stop loss a few pips above the high of the move to allow for the spread. Sometimes the spreads can also temporarily widen and we might get stopped out anyway. Anyway, the trade should have come off for a 2% rise on our bank – but we will never know now for sure.

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