Trade Example – AUD/JPY

Filed under: Learn Forex Trading |

 

I don’t currently have a live trade in play (although currently up by 9% for the year!), so today; I will take you through a trade setup that I missed.

 

FIgure 1,

FIgure 1,

The trade example comes on the AUD/JPY pair, which for those of you that still don’t know is the pair for the Australian dollar and the Japanese yen. If you look at Figure 1, you will see the daily chart for the AUD/JPY pair. The first thing that you will notice here is that the pair is in a powerful uptrend. The 8-day exponential moving average is crossed above the 21-day exponential moving average, and the chart is clearly moving up from left to right. At the top of the chart, I have marked in the most recent high and drawn a resistance level here (marked with a horizontal green band). This is the next level that the market has to break through.

 

Figure 2.

Figure 2.

Figure 2 now shows the 4-hour chart for the same AUD/JPY pair. What you can see here is that as price approached the aforementioned resistance area, a bearish engulfing pattern formed right at this level. Now, what we could have done here at the close of this bearish candle, would be to go short at a 50% retracement of the bearish candle, with a stop loss placed just above the high of the move, and with a target set of two and a half times the risk. If we had done this, the target would now have been met for a very nice 2.5% rise on the bank. However, I felt that going against the very strong bullish momentum of the daily chart was perhaps unwise, and therefore, I stepped aside from this one. Well, that’s it again for today – and I’ll be back with more tomorrow.

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