The Daily Trade – Day 51

Filed under: Learn Forex Trading |

Trade Number 51 – NZD/USD 1-Hour Chart

I have yet another trade example for you today, and this time it comes yet again on the NZD/USD forex pair on the 1-hour chart. We have very recently had a successful trade on this pair with a similar setup, so we are looking to take advantage of a similar situation yet again.

 

Figure 1.

We will begin as always by taking a look at the daily chart (see Figure 1.), as this is key for examining the key areas of support and resistance, which we use to mark as key zones for any price action signals to occur. The daily chart clearly shows that there is a key area which price is reacting to at around the 0.81156 level. This was first a relevant resistance area in around April of this year, and then a change of polarity saw this resistance become new support, and this level has held four or five times as support since then. We have just had a bounce off of this level, so we are looking for another similar reaction.

Figure 2.

 

If you now take a look at the 1-hour chart on this pair (see Figure 2.), you will see that a very nice little bullish engulfing pattern emerged at this level, which is our cue to get in on a long trade. We should put our stop loss a few pips below the low of the move, and this risk could be either 0.5%, 1%, or a maximum of 2% of our trading bank. I usually risk 1%, but this is your preference and pain threshold; and we should be going for a reward of at least 2% of our trading bank.

 

Figure 3.

Figure 3. shows that this trade would have been successful with a risk-reward of 1:2, as price reacted very well to this level once again. More tomorrow.

 

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