Trade Example – AUD/USD

Filed under: Learn Forex Trading |

I have a very simple trade example for you on the AUD/USD pair today. This kind of trade is a staple of forex price action trading, so it is important that you understand the idea behind it and are able to spot these setups for yourself.

 

Figure 1.

Figure 1 shows the daily chart for the AUD/USD forex currency pair. What you can see here is that the 8-day EMA has recently crossed below the 21-day EMA, and the chart has started to move down with some momentum. In this kind of chart, we are better off only taking trades that go with this dominant momentum – so we are on the lookout for price action confirmation setups that confirm this bearish momentum on the daily, 4-hour, and 1-hour charts.

 

Figure 2.

If you now look at Figure 2, you will see the 4-hour chart for the same AUD/USD forex currency pair. I have highlighted the candle that we are most interested in with a green block. This is a bearish pin bar, which bounced off of the 8-day EMA and a good area of support/resistance. We could have taken a short trade here by putting an order in to go short at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the pin bar, and a target of three times our risk.

 

Unfortunately, I missed this one myself as I was out doing something (we cannot sit at our screens ALL day!). However, if you had spotted it, you would have made a nice 3% rise on your bank. Not bad considering that the trade would have come to fruition in less than one day. Well, that’s all that I have for your today – but I’ll be back tomorrow with another forex price action trade example.

 

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