Trade Example – AUD/USD

Filed under: Learn Forex Trading |

I have a trade example for you on the AUD/USD pair. I actually had an order opened but since it has not been filled, I have now closed this order. However, I still think it would be useful to run through this setup, as it is a setup that we are continually on the lookout for.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the AUD/USD pair, and it is the only timeframe that we will need to use for this setup. You will see a number of things on this chart. To begin with, the yellow lines are Fibonacci retracement lines. What you can see here is that price has done an EXACT 50% retracement before pulling back, so when price once again approached this level, which is now a support zone (and this marked in on my chart with a thin red horizontal line), I was on the lookout for any price action confirmation signals.

 

As you can see, a very nicely defined pin bar formed at the level in question. Thus, what I did here was to put an order in to go short at a 50% retracement of this pin bar, with a stop loss placed just a few pips above the high of this move, and with a target set of two times my risk. I did this by splitting the trade into two blocks. 70% of the lots had a risk-reward (RR) of 1:1, and 30% of my lots had an RR of 1:2. What this effectively meant is that if price made it to 1:1, then I would lock in a 0.4% profit on my bank, and let the rest run to a possible 1.3% profit. Unfortunately, the order once again just missed out on being filled by a few pips, otherwise, we would already have locked some profits in.

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