The Daily Trade – Day 67

Filed under: Learn Forex Trading |

Trade Number 67 – EUR/USD 1-Hour Chart

Today’s “Daily Trade” forex price action trading example comes on the EUR/USD major currency pair. The recent trend has been down on this pair until it popped back up recently and formed a 50% Fibonacci retracement. If you look at Figure 1, you will see that price has reached a significant area of support/resistance, which coincides with this 50% Fibonacci line. The support/resistance “zone” has been respected five or six times in the past ten months or so, so it is an area that has a very high probability of a price action reaction. Once price moves into this zone, we should be looking out for any price action signals on the daily, 4-hour, and 1-hour charts – but anything lower than this we can ignore, as the signals tend to be less reliable.

 

Figure 1.

If you now look at Figure 2, you will see that a very large bearish engulfing pattern formed right in this zone, which tips us off to the fact that a move down might be imminent and a continuation of the recent trend may be on the cards. This would be a good time and place to take a short trade, with a stop loss just a few pips above the high of the move and a target of two times our risk. So if our risk is 1%, then our target will be 2%.

 

Figure 2.

Figure 3 shows what would have happened if you had taken this trade. Price did indeed continue to move downwards and the target would have been comfortably met for a 2% rise on your bank. So if you have a bank of 10,000 GBP, you would have made a profit of 200 GBP – which is probably something like the interest you would gain if you kept that money in a bank for a whole year! Not bad for a few hours “work”. I’ll be back to tomorrow with more – see you then.

Figure 3.

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