Trade Example – AUD/USD 1-Hour Chart

Filed under: Learn Forex Trading |

 

Well, I’ve given a lot of forex trade examples for you to digest over the past few months, and here is one more just to round the year off nicely. I have something slightly different for you today. Usually we look at support/resistance areas on the daily charts and trade off of these levels with price action signals. But today, I am going to show you that it is also possible to use support and resistance levels off the intraday charts, and that you can also trade off these level (although these levels hold less weight).

 

Figure 1.

Figure 1 shows the 1-hour chart for the AUD/USD forex pair, which is the exchange rate between the Australian dollar and the United States dollar. What we see here was that price was moving down before a bullish engulfing pattern formed. A bullish engulfing pattern often creates a good area of support for any future price movement, so this can be seen as an intraday level of support. Price then moved up a little after the bullish engulfing pattern, before testing this area once again. What emerged next was yet another bullish engulfing pattern, which confirms that previous support level. What we can do here is take a long trade with a stop loss just a few pips below the low of this move, and a target of at least two times our risk (although in this case, we probably should be going for three or four times our risk as the stop is so tight).

 

Figure 2.

Figure 2 shows what would have happened had we taken this trade. Price moved up very well and our target of two, three, or even four times our risk would have been met. Well, that’s it for today, and this year… so all that is left for me to do is wish you a very profitable and healthy 2012. See you next year!

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