The Daily Trade – Day 71

Filed under: Learn Forex Trading |

Trade Number 71 – USD/CAD 1-Hour Chart

 

Figure 1.

What I have for you today is a trade example on the popular USD/CAD forex currency chart. This is one of the major forex pairs so it has a very high level of liquidity. To begin with, if you take a look at the daily chart (see figure 1), you will see that price has been approaching a level that has been marked with a green band. This is how I mark any significant areas of support and resistance. This area has been tested twice in the past three months or so, and it has also been a significant area further into the past but that is not visible on this zoomed in chart. Once price enters this zone, this is a good area to look out for any price action setups on the daily, 4-hour, and 1-hour charts.

 

Figure 2.

If you now take a look at figure 2, you will see how price formed a very nice bullish engulfing pattern once it touched this zone, and this candle engulfed the previous four candles, which is always a very good sign. This signals to us that the probability of a market turn has increased, and we could take a long trade here with a risk-reward scenario of at least 1:2. So if we risk 1% of our bank, our target will be a 2% rise on our bank.

Figure 3.

 

Figure 3 shows, very graphically; just how well price reacted to this zone. There was a massive spike in the price with a candle that took out the previous twenty candles or more (I have not bothered to count them!). We would easily have reached our 2% target – in fact, we could have had 3 or 4% in hindsight. This trade would have given us a very quick profit – which is always a good thing! I’ll be back tomorrow with more…

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