Trade Example – AUD/NZD

Filed under: Learn Forex Trading |

I have a nice little trade setup to talk you through today on the AUD/NZD forex currency pair, which is the pair for the Australian dollar and the New Zealand dollar.

To begin with, take a good look at Figure 1. This is the daily chart for the AUD/NZD pair; so for those of you not familiar with candlestick charts, each candle represents one day’s worth of price movement. By casually inspecting the chart, you can instantly glean that it is roughly moving down from left to right. You can also see that the 8-day exponential moving average is crossed well below the 21-day exponential moving average. There are also sixteen black bear candles to only four bull candles. All of this tells us that the market sentiment is unequivocally down. In this kind of market, we only really want to be trading in the direction of that momentum, so we should be on the lookout for any price action signals in the direction of that dominant trend.

 

Figure 2.

Figure 2 now shows the 1-hour chart for the same AUD/NZD pair. On this chart, I have marked in a multiple inside bar set up, with no less than six candles engulfed by one mother candle. This shows that the market is consolidating and taking a breather. A good move here would have been to put an order in at the break of the low of the mother candle, with a stop loss just a few pips above the high of the mother candle, and a target of three times our risk. When trading with the dominant momentum of the market, we have a much better chance of success, and this would have proved to be so here. This trade would have been successful for a 3% rise on our bank. That’s it for today – more tomorrow.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>