The Daily Trade – Day 6

Filed under: Learn Forex Trading |

I made a trade on the GBP/AUD pair yesterday which was a textbook setup in the trading methodology that I am employing, and serves as a great example.

Figure 1. - GBP/AUD Daily Chart

As you can see from the daily chart (see Figure 1.), price was approaching what had been a very significant level in the past. There were around ten occasions before where price had approached this support level and rejected it – making it a very strong support/resistance zone. Price did finally break through this zone at the end of June, so we were looking for any retracement back up to that level. Indeed, price did make it back up to this zone, so I started looking for any price action signals on the 1 hour and 4 hour charts.

Figure 2. GBP/AUD - 4 Hour Chart

As you can see from the 4 hour chart (see Figure 2), a nice bearish engulfing pattern emerged right in this zone, so I sold short and went for a 1:2 risk reward with my stop loss being a few pips above the high of this move. The high happened to be two bars back in the bullish pin bar. I really liked this setup as it was a strong reversal signal and it was right on the zone that I had marked in.

Figure 3. GBP/AUD - 4 Hour Chart

As you can see from Figure 3, it did not take long for the trade to move in our favor. There was a slight period of consolidation before price really plummeted and reached our target for a 2% profit on our bank. As I said, this was something of a textbook trade and I was very happy with the outcome. I was however, a little conservative again with my target, and it may well be that price moves down further as there is not much support on the daily chart. I’ll be back again tomorrow for yet another trade example.

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