The Daily Trade – Day 7

Filed under: Learn Forex Trading |

Trade 7 – EUR/GBP (1 Hour Chart)

I entered a trade on the EUR/GBP this morning with a nice risk reward ratio of 1:4. Let’s begin as usual by looking at the daily chart (See Figure 1.). As you can see, price had been approaching a significant level of support/resistance – with price rejecting this level over ten times so far this year. Also, with the recent capitulation downwards in the past couple of weeks, we are with the mid-term trend, and a further move downwards is likely. So, I had been keeping a watchful eye out for any price action signals on the intraday charts – namely the 1 hour and 4 hour timeframes, as anything lower than this can give unreliable signals.

Figure 1.

As you can see on the 1 hour chart (see Figure 2.), price had already rejected this “zone” on a couple of recent occasions. However, the first signal had a bit of a tail on it, suggesting that it might be moving back up. The second rejection was a dark cloud cover signal, which is not strong enough, in my eyes, to take the trade. But the third rejection was a nice bearish engulfing pattern, and based on the previous two rejections of this level over the past few hours, it seemed like a good trade to take – especially considering the risk reward scenario on offer.

Figure 2.

Price moved up a little before I could get the trade on, which wasn’t a bad thing as I was able to get in on a 50% retracement of the bearish candle. With this in mind, I took a 1:4 risk reward, with my stop just above the high of the move – also allowing for the spread. My plan is to move my stop to breakeven once the trade reaches two times my risk. I will update you on how this trade turns out tomorrow.

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