The Daily Trade – Day 49

Filed under: Learn Forex Trading |

Trade Number 49 – AUD/CAD 1-Hour Chart

Another forex trading example for you today, and this time, it comes on the lesser-known AUD/CAD chart. Many traders profess that it is better to get to known one forex pair really well and stick to that, but with my style of trading, I think that the methodology works well over all forex pairs.

 

Figure 1.

Let’s begin by looking at Figure 1. and analyzing the support/resistance zones. I have a long one marked in on the middle of the chart. While this is not the neatest zone in the world, it has been respected on five out of eight occasions. There has also been a nice change of polarity and we are still in a long-term up-trend, which all serves to put the odds in our favor. There were a couple of massive pin bars at the beginning of August, but on both occasions price was unable to close through this zone – which is a good indication of the strength of the zone.

 

Figure 2.

If you now look at Figure 2., you will see that a nice bullish engulfing pattern emerged just a few pips above this zone, which also had a nice long tail on it. This would have made for a good trading opportunity, with a stop loss a few pips below the low of the move and a risk-reward of at least 1:2.

 

Figure 3.

Now, take a look at Figure 3., and you will notice that price briefly moved below our bullish engulfing pattern by just a few pips. This would probably have been enough to take us out of the trade with most brokers. However, if you made your stop loss wide enough, you could have got lucky as price did indeed move up after this and a 2% rise on the bank was there if you had not been stopped out. Sometimes we get lucky, and other times we don’t – but they all tend to even out in the end over a long series of trades. Well, that’s all for this week – more next week. Until then, have a great weekend.

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