The Daily Trade – Day 60

Filed under: Learn Forex Trading |

Trade Number 60 – USD/CHF 1-Hour Chart

For today’s “Daily Trade” example, I would like to direct your attention to the USD/CHF forex pair, which is one of the most traded forex pairs and one of those that is regard as a ‘major’ pair.

 

Figure 1.

To begin with, take a look at Figure 1, which is the daily chart for the USD/CHF pair. This shows that the pair has been in a long-term downtrend. However recently, the pair has deviated from that trend, and is approaching a 50% Fibonacci retracement area. There is also an area of support/resistance at this area, which has been reacted to at three times in the recent past, in December 2010, and February and March 2011, first as resistance, and then as support. With the confluence of a Fibonacci retracement zone and a support/resistance zone, this is a good place to look out for any price action signals on the intraday 4-hour and 1-hour charts.

 

Figure 2.

If you now look at Figure 2, you will see that a nice bearish engulfing pattern emerged right at this level on the 1-hour chart. You may have gotten in a few bars earlier with a similar pattern and got stopped out. However, that does not mean that the setup is not valid. A stop loss should have been place just above the high of the move, with a target of at least two times our risk.

 

Figure 3.

Figure 3 clearly shows that this trade would have been successful, and your bank would have risen by 2%, which is about the average yearly interest rate on a savings account at the bank these days, so not bad for a few hours work (if you can call it that). That’s the end of today’s trade example – more tomorrow.

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