The Daily Trade – Day 5

Filed under: Learn Forex Trading |

Trade Number 5 – EUR/GBP

Figure 1. Daily Chart - EUR/GBP

I just took a trade on the EUR/GBP pair a couple of hours ago. As you can see from the daily chart (see Figure 1.), the long term trend is most definitely up, with the 21 day exponential moving average above the 126 day exponential moving average. I use these moving averages because they are approximately one month and six month averages. You can also see on the daily chart that there is a support/resistance zone, marked with a thin red line and a thicker green band showing the “zone”, that price is approaching. Price has bounced off this zone on five different occasions in the past three months or so, so it is a significant level. Furthermore, price is also approaching a 50% Fibonacci retracement area – so this is a good confluence of signals, but we need verification before taking any trade in a situation like this. That verification comes in the form of a price action signal.

Figure 2. 1 Hour Chart - EUR/GBP

When we zoom in to a 1 hour chart (see Figure 2.), we see that a bullish engulfing pattern formed at that level early on 18th July. This was my cue to get in on the trade, and I set my stop just a few pips below the low (to allow for the spread), and I took a 1:3 risk reward with my target just below the preceding high on the 1 hour chart. My only concern with this trade is that we are going against a strong two week trend on the daily chart. This could be seen as going against recent momentum and trading in a contrarian style. However, in my view, the overall long term trend is still up and there is significant resistance at this area, so it is worth looking for a slight bounce on the one hour chart for a 1:3 risk reward. I will update you on how this trade goes tomorrow.

.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>