The Daily Trade – Day 56

Filed under: Learn Forex Trading |

Trade Number 56 – GBP/USD 1-Hour Chart

 

Figure 1.

Continuing on from the commentary from yesterday, there was another great trade setup on the GBP/USD chart on the 1-hour chart at the same level that we talked about. Just to remind you or explain if you did not read yesterday’s trade example, take a look at Figure 1. You will see a very obvious level of support on the daily chart, and the strongest levels usually are obvious. It was valid at the end of July 2010, and then again at the turn of the year. Now that price has approached this level once again, it is a good place to look for any price action setups.

 

Figure 2.

If you now look at Figure 2, you will see that price moved into this zone on the 1-hour chart and then formed a nice bullish engulfing pattern, which took out the previous three candles. This would have been a good time to take a long trade and place a stop loss just below the low of the previous candle. A risk reward of 1:3 could have been taken, as the stop loss would have been quite tight and there was plenty of space for price to move into.

 

Figure 3.

If you had taken this trade you would have been very pleased with the result. Price reacted very strongly to this level and your target of 3% of your bank would have been met in well under a day. In fact, it turned out that a much higher risk-reward could have been taken, but this is always very easy to say in hindsight. I will leave you with that for today and I’ll be back tomorrow for another price action trade example. Until then… have a great night.

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