Trade Example – AUD/NZD

Filed under: Learn Forex Trading |

I have a trade example for you today on the AUD/NZD forex currency pair. For those of you that don’t know or aren’t familiar, this is the pair for the Australian dollar and the New Zealand dollar.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the AUD/NZD pair and it is the timeframe that we use to assess the trend. As you can see, the 8-day exponential moving average is cross below the 21-day exponential moving average and the chart is visibly moving down from left to right. This tells us that the market is bearish, so we should only be looking out for price action signals that confirm this bearish momentum.

 

Figure 2.

Next, Figure 2 shows the 4-hour chart for the same AUD/NZD pair. To begin with, I have drawn in a thin red horizontal line to mark in an area of support/resistance. This area has been respected on three occasions in the recent past. A very nice bearish engulfing pattern formed right at this area (highlighted in yellow), confirming the support/resistance area. This would have been a good time to put an order in at the break of the bearish candle, with a stop loss just a few pips above the high of the move, 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. This kind of setup gives us a good chance because we are going with the market momentum and there is a confluence of signals confirming that the market is going to resume this momentum. Well, that’s all that I have for you today – and I’ll be back with more tomorrow. Until then, I wish you happy trading.

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