Trade Example – AUD/JPY

Filed under: Learn Forex Trading |

There was a very solid trade setup on the AUD/JPY forex currency pair last week. For those of you that don’t know, this is the pair for the Australian dollar and the Japanese yen; and I would like to talk you through this setup right now.

 

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 timeframe that we look at to assess the trend. As you can see, the chart is visibly moving up from left to right and the 8-day exponential moving average is crossed above the 21-day exponential moving average. This all tells us that the pair is in a nice bull trend and has some good upwards momentum. In this kind of trend, it is better to look out for price action signals that confirm this bullish momentum.

 

Figure 2.

Figure 2 shows the 4-hour chart for the same AUD/JPY pair. What you can see on this chart is a very strong area of support/resistance (marked with a green band). This area first acted as a good resistance level, before gapping up (which also acts as an area of support/resistance), and then becoming the new support. So when price came back down to this area and formed a bullish engulfing pattern, this would have been a good place to go long at the break of the high of the bullish engulfing bar, with a stop loss placed just a few pips below the engulfing bar, and a target of at least two times our risk.

 

As you can see, this trade would have been successful for a very quick 2% rise on our bank. Well, that’s all that I have for you today – and I will be back with another price action forex trade example for you tomorrow. Until then… happy trading!

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