The Daily Trade – Day 88

Filed under: Learn Forex Trading |

Trade Number 88 – AUD/CHF 1-Hour Chart

I’d like to take a look at a slightly different set up for the daily trade today, as I have given plenty examples of engulfing patterns now. Today, I’d like to take you through a 50% retracement of a pin bar, something that I discussed yesterday in the forex-related article.

 

Figure 1.

If you first take a look at Figure 1, you will see the daily chart for the AUD/CHF forex currency pair. What we see here is that there was a strong area of resistance at the top of the chart, which I have marked in with a green band or “zone”. This resistance was eventually broken and subsequently became support. So this is the area where we should be looking out for any price action setups on the lower timeframes.

 

Figure 2.

If you now take a look at Figure 2, you will see the 1-hour chart for the AUD/CHF pair. You will see that price returned once again to our green zone, and then formed a nice pin bar. This means that price moved all the way down and then all the way back up, all in the space of one hour. This tips us off that the market sentiment might be changing. Now, we could get in straight way with a long trade and go for a risk-reward of 1:2. Or, we could set an order to go long if price retraces by 50% the length of the pin bar (so our entry will be mid-point of the pin bar). By doing this, our stop is tighter and we can go for a target of three times our risk, or perhaps even more.

 

Figure 3.

Figure 3 shows that this trade would have been successful for a 3% rise on our bank. That’s it for today, and I’ll be back for another trade example tomorrow.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>