The Daily Trade – Day 85

Filed under: Learn Forex Trading |

 

Trade Number 85 – GBP/USD 1-Hour Chart

Good morning everybody and welcome to yet another week in the world of forex. What I have for you today is a trade example on the ever-popular GBP/USD forex currency pair. This pair has extremely good liquidity and is one if the most traded pairs around.

 

Figure 1.

Let’s begin by taking a look at Figure 1. This is the daily chart for the GBP/USD pair. If you look at the green band at the top of the chart, which I had drawn in, you will see that there is a nice area of support and resistance, which acted first as support and then as resistance in a change of polarity. It had been firmly respected on three previous occasions in the recent past – so this was a good area to be looking out for any price action setups on the daily, 4-hour, and 1-hour charts.

 

Figure 2.

If you now look at Figure 2, which is the 1-hour chart for the GBP/USD pair, you will see that price moved up very sharply before reaching the zone in question and forming a bearish engulfing pattern. The engulfing pattern came after a very indecisive looking doji candle, so this only served to make the chances of a turn even stronger. A short trade would have been good here with a stop loss just a few pips above the high of the move. I think a risk-reward of 1:3 could have been taken here – so if you risked 1% of your bank, then your target would be 3%.

 

Figure 3.

Figure 3 shows that our stop loss would almost have been hit before price plummeted downwards and our target would have been reached for a nice 3% rise on our bank. Well, that’s it for today – more tomorrow.

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