Trade Example – AUD/USD

Filed under: Learn Forex Trading |

I have a story of another forex trade that got away today, and this really does show the fine margins between success and failure in the forex markets.

 

Figure 1.

Figure 1.

Take a look at Figure 1. This is the daily chart for the AUD/USD forex currency pair (which is the pair for the Australian dollar and the United States dollar). What you can see here is that the pair is in a downtrend, with the 8-day exponential moving average crossed below the 21-day exponential moving average. However, price has formed a bottom, and I have marked in this bottom as an area of resistance in the market.

 

Figure 2.

Figure 2.

If you now take a look at Figure 2, you will see some interesting price action right at this aforementioned level of resistance. First we have a bullish engulfing pattern, followed by a couple of doji-like candles, which also happen to be an inside bar, signalling indecision in the market. Next, we have a bullish pin bar, which fakes out from the inside bar and forms a new low, before reversing back up and rejecting these prices. I put an order in here to go long at a 50% retracement of the pin bar, with a stop loss placed just a few pip below the low of the pin bar, and a target set of two and a half times the risk. Unfortunately, my order was never filled due to the spread temporarily widening, and the pair proceeded to move up, surpassing my target level. This could easily have been a 2.5% rise on the bank, which would have much mitigated the 5% losses in February. Hopefully, things will start to turn around soon – but until then, we just have to keep doing the right things, and not make any emotional trading decisions.

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