Trade Example – AUD/JPY

Filed under: Learn Forex Trading |

There was a possible trade on the AUD/JPY forex currency pair (the pair for the Australian dollar and the Japanese yen) that would have turned out very well indeed had you taken it, and I would like to run through this setup right now.


FIgure 1.

FIgure 1.

To begin with, take a look at Figure 1. This is the daily chart for the AUD/JPY pair, and it is the only timeframe that we will need to look at for this particular setup. At the top of the chart, you will see a horizontal red line, which marks a very important area of support/resistance. You can see one of the touches on this area on the chart, but if you zoom out, you will also see that this area has even greater relevance going back in time. So, when price recently approached this area once again, we could have been on the lookout for any bearish price action signals, given that the long-term market is bearish.


Price started to struggle at this level, with a number of short bullish candles, before a bearish engulfing candle took out the last three trading days, and signalled that a bearish market sentiment had taken over. It was here, at the close of this bearish candle, that an order could have been placed to go short at the break of the low of this candle, with a stop loss placed just a few pips above the high of the move, and a target set of at least two times the risk. Another option could have been to trail the stop to just a few pips above the high of the previous candle, and by doing this; we would still be in this trade to the tune of around two and a half times the risk.

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