The Daily Trade – Day 48

Filed under: Learn Forex Trading |

Trade Number 48 – EUR/GBP 4-Hour Chart

 

Figure 1.

I have another nice little trade setup for you today on the EUR/GBP forex chart. Take a look at the green zone at the bottom of Figure 1., which is a very strong area of support/resistance that has held firmly on four previous occasions since December 2010. It first held twice as resistance and then there was a change of polarity as price moved up through this zone, and then this old resistance became new support and the zone held twice more. If you had spotted this very strong area of support/resistance, then you could have been looking out for any price action signals on the daily, 4-hour, and 1-hour charts. This is actually a trade that I had missed in August due to moving house – in fact; I have only just spotted it.

Figure 2.

 

If you now look at Figure 2., you will see that price once again moved down to this zone and a very nice bullish engulfing pattern formed on the 4-hour EUR/GBP chart. This came after an inside bar, and then a pin bar, so there were some good signals leading up to the engulfing pattern. When the engulfing pattern came after the pin bar, this signaled a very strong possibility of a turn. We could therefore have taken a long trade here with a stop loss just below the low of the move and a risk-reward of perhaps 1:3. There was a minor area of support/resistance on the daily chart before a 1:2 scenario, so it would have made more sense to go for a 3% gain on our bank to offset that risk.

 

Figure 3.

If you now look at Figure 3., you will see that price reacted very well to this level and moved up very nicely for what would have been a 3% rise on our bank. It did struggle to break through the minor support/resistance that we mentioned, but when it broke through – it was decisive. I will leave you with that for today and I’ll be back with more soon.

 

 

 

 

 

 

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