The Daily Trade – Day 1 (the result)

Filed under: Learn Forex Trading |

Well, on 5th July I talked about a trade set-up that I’d found on the GBP/CHF pair on the 4 hour chart.  We’d put a limit order in to sell on the break of the mother candle of the inside bar, which was at a significant area of support/resistance on the daily chart. It was also a 61.8% Fibonacci retracement area, and it was with the long term daily trend – so we had a very strong confluence of signals. It wasn’t long before the low of the mother candle was broken and we entered the trade going short.

Once we were in the trade, the pair moved sideways for a few sessions on the 4 hour chart in a period of consolidation before plummeting downwards. We almost hit our 1:2 risk reward target very quickly, but it reversed, forming a huge pin bar on the 4 hour chart. This for many would have been a signal to get out of the trade. However, I find that by managing my trades once they are on, I make significantly less profits in the long run than if I had just let my trades complete in a ‘set and forget’ fashion. So, I let this one run and we were duly reward and reached our target  just over one day after the trade was entered. I usually risk 1% of my bank on each trade, so that was a 2% gain on the bank and a very nice trade.

Figure 1. GBP/CHF - 4 Hour Chart

As you can see from the chart (Figure 1.), the pair continued to move lower over the next couple of days, and we could easily have locked in a 1:3 risk reward ratio. However, the candles never tell us how far a move is likely to go, only that the probability of a turn is more likely. Therefore, we must use logical exits by looking at previous support and resistance levels to determine our exit. In this case, I was perhaps a little conservative, and did not take it to the next logical support/resistance level as I wanted to lock in some profits.

So this was a good trade to start with and a nice example. We will have more trades throughout the week. Happy trading!

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