Trade Example – AUD/JPY

Filed under: Learn Forex Trading |

 

I have a trade example for you today on the AUD/JPY, which is the exchange rate between the Australian dollar and the Japanese yen; and it is another breakout strategy that we were discussing yesterday.

 

Figure 1.

If you look at Figure 1, you will see the daily chart for the AUD/JPY pair, and this is the only chart that we will need to assess this particular example. I have highlighted the candle of interest in green. What you will see is that price was moving down, and the 8-day exponential moving average was crossed below the 21-day exponential moving average. Price made a new low, and then retraced a little bit, unable to break through this level. Price then came close to this level several times, but was unable to penetrate it. This is the level that we are looking for price to close through before we think about going short.

 

With the two candles before the highlighted green candle, price was sitting right on top of this level in question, but again, it was unable to break through this barrier. So when price did break through and close below this level, this would have been a good time to take a short trade – as it was a decisive break.

 

We could have put a sell stop order in at the break of the low of the highlighted green candle, with a stop loss placed just a few pips above the high of the highlighted green candle, and a target of three or four times our risk since the stop loss would have been fairly tight. A good risk level would have been 1% of our bank. As you can see, the trade would have been successful, and had we had a profit target of three times our risk, we would have had a nice 3% rise on our bank. That’s it for today – more tomorrow.

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