Trade Example – AUD/USD

Filed under: Learn Forex Trading |

 

We currently have one live trade that is in play (and currently in profit), so today; I will take you through another trade example. This time, the example comes on the AUD/USD forex currency pair, which is the pair for the Australian dollar and the United States dollar.

 

Figure 1.

To begin with, please take a look at Figure 1. This, as always, is the daily chart for the AUD/USD pair. We use the daily charts to assess the trend, which is important as we always try to trade in the direction of the dominant trend. If a pair is moving sideways, we tend not to trade it unless the range is very defined.

 

As you can see from the chart, the trend is very much bearish. The chart visibly moves down from left to right, and the 8-day exponential moving average is crossed well below the 21-day exponential moving average, and it has been for some time. What’s more, the two moving averages seem to be moving further apart, which is a good sign of momentum. As a result, we are only on the lookout for price action signals that confirm the bearish momentum.

 

Figure 2.

Figure 2 shows the 1-hour chart for the same AUD/USD forex pair. What you can see here is that price had made a retracement up to the 150-hour exponential moving average, before forming a bearish engulfing pattern. As I have said before, the 150-hour exponential moving average is often a very good area of support/resistance, so we could have put an order in here at the break of the low of the bearish candle, with a stop loss just a few pips above the high of the move, and a target of three or four times our risk. As you can see, this trade would have been successful for a very nice 3-4% rise on our bank.

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