The Daily Trade – Day 41

Filed under: Learn Forex Trading |

Trade Number 41 – USD/CHF 1-Hour Chart

Good morning everyone. Today I have another price action trading example for you all. This time, the example comes on the USD/CHF forex pair on the 1-hour chart. But to begin with, let’s look at the daily chart to find our significant support and resistance levels.

Figure 1.

 

If you look at Figure 1., you will see the daily chart for the USD/CHF pair. As you can see, the overall long term trend is down, with the 21 day exponential moving average still well below the 126 day exponential moving average, which indicates a down trend. However, recently, there has been quite a retracement back up, and price made it back up to a previous level of support/resistance. Price broke through this level, and the upward momentum was very strong indeed, indicating that the long-term trend may be over. When price broke through this level, I was looking for any price action signals on the 1 hour and 4 hour charts.

 

Figure 2.

If you now look at Figure 2., you will see that on the 1-hour chart, a nice bullish engulfing pattern emerged after a little move down back towards our support/resistance zone. This was our signal to get in on a long trade and go with the recently momentum. Our stop loss should have been a few pips below the low of the move, with a target of at least two times our risk.

 

Figure 3.

Now, turning to Figure 3., you will see that price moved up very nicely, and we could have had profits of three or four times our risk quite comfortably. Indeed, since the next resistance level on the daily chart was quite a way away, we would probably have gone for a risk reward of at least 1:3. Well, that’s it for today, so I’ll see you tomorrow.

One Response to The Daily Trade – Day 41

  1. Thanks Quincy. If you read my “Daily Trades”, you will see that being right 50% of the time is actually fine as long as you have a risk reward scenario of at least 1:2. If you can do this, then you will be very profitable.

    JayG
    December 7, 2011 at 10:40 am
    Reply

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