The Daily Trade – Day 9

Filed under: Learn Forex Trading |

Trade number 9 – EUR/NZD

I entered a trade on the EUR/NZD a few days ago with a little longer time frame than usual. Although it is on the 4 hour chart, it has a very wide stop and an even wider target, so it is taking a long time for the trade to be resolved. I will now talk you through the setup and the reasons why I entered it.

Figure 1.

Let’s begin with the daily chart (see Figure 1.), and outline our reasons for watching out for any price action signals. As you can see from the chart, I had drawn in a support/resistance “zone” marking the one year low. Although this is a significant level of resistance, it has only been touched once, and I usually like a resistance level to be rejected at least two or three times to give it any strength. Also, since the bears have been fully in charge and there is a very powerful move downwards, I did not want to take any trades against this strong momentum. Therefore, when price reached this level, I was keeping an eye out for a break through it.

Figure 2.

Price did indeed penetrate and close beyond this level, and an inside bar formed on the 4 hour chart (see Figure 2.). In the following 8 hours, two more inside bars formed one after another, showing that price was consolidating and getting squeezed. I put a sell order in at the low of the first mother candle, with my stop loss placed just a few pips above the mother candle. My target was set at just two times my risk as the stop was quite wide.

Since then, there were a few more candles within the first mother candle, before it finally broke out to the down side and our order was filled. I am still in this trade and we have reached one times my risk but it is moving down slowly. I will let you know the result of this trade as and when it happens.

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