Trade Example – AUD/JPY

Filed under: Learn Forex Trading |

I have a nice little forex price action trade example for you today on the AUD/JPY currency pair. If you begin by looking at Figure 1, you will see the daily chart for the AUD/JPY pair, which is the exchange rate between the Australian dollar and the Japanese yen.

 

Figure 1.

As you can see, the chart visibly moves up from left to right. The 8-day exponential moving average is also crossed well above the 21-day exponential moving average. All of this tells us that the pair is in a good bull trend. As such, we are better off looking out for any price action signals that confirm this bullish momentum. I have also marked in some good areas of support and resistance on this chart, which I have marked with horizontal green bands. You will see that price has just bounced off of one of these bands. This is where we could have got in on a trade.

 

Figure 2.

Figure 2 shows the 4-hour chart for the same AUD/JPY pair. The reason I am showing you this chart is to show you that price had made a 50% Fibonacci retracements. If you now look at Figure 3, which is a 1-hour chart, we can zoom in and see more clearly. As you can see, there is a nice double bottom, confirming the support level. There is also a nice bullish engulfing pattern (which I have highlighted in green). We could have put an order in to go long at the break of the high of this bullish candle, with a stop loss placed just a few pips below the low of the candle, and a target of two times our risk. As you can see, this trade would have been successful for a very nice 2% rise on our bank. That’s it for today – more tomorrow.

Figure 3.

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