The Daily Trade – Day 3

Filed under: Learn Forex Trading |

Hello everyone. This is Jay here from “The Daily Trade” at eforexsystemreviews.com. I would like to start today by just saying a few words about my trading methodology. As you might already have guessed, I primarily used price action signals using the candlestick charts, and I look for these signals at areas of significant support and resistance on the daily charts. I take price action signals on the 1 hour, 4 hour, and daily charts. But I do not go lower than that because I believe that the signals are not as reliable on the lower timeframe charts – plus, the spread tends to eat up most of the profits on the lower timeframes. So that is a basic overview of my trading style, so without further ado, let’s move on to today’s trade.

Trade Number 3 – EUR/GBP (1 hour chart)

Figure 1. EUR/GBP - Daily Chart

This trade is on the EUR/GBP pair. As you can see on the daily chart (figure 1), I have a number of green support/resistance “zones” drawn in. The initial one in question is the line where the price is moving towards around 0.87440. There had been a powerful move down towards this line. However, the overall long term trend is up, as we can see from our 21 day and 126 day exponential moving averages (this is roughly one month and six months of forex data), so this can be seen as almost a 50% retracement on the daily chart. This level had been significant and held well two or three times in the past, so I kept a lookout for any price action signals on the 1 hour and 4 hour charts.

Figure 2. EUR/GBP - 1 Hour Chart

There was a bullish engulfing patter on the 1 hour chart, but unfortunately, we were not able to put a trade on as we weren’t able to get a risk reward ratio of 1:2, as our next support/resistance zone was quite close at around 0.88347. However, after a move up, price hit this resistance zone, and formed a nice little bearish engulfing pattern after an indecisive doji candle, which suggests exhaustion in the market. The market moved up by a few pips while I was putting the trade on, and I set my target with a risk-reward of 1:3 (see Figure 2.). I almost went for a conservative 1:2, but in the end, I decided to be more bold given the force of the recent move down, and hope that it tested support once more. I will update you with the result as and when it happens.

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