Trade Example – CAD/JPY

Filed under: Learn Forex Trading |

 

I have a forex price action trade setup on the CAD/JPY pair for you today – and for those of you that don’t know, that is the pair for the Canadian dollar and the Japanese yen. This is not one of the major pairs, but as all forex currency pairs do, it still has a lot of liquidity.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the CAD/JPY pair, and this is the only timeframe that we will be looking at during this trade example. Sometimes we also use the 4-hour and 1-hour timeframes, but we never go below those timeframes, as the charts tend to get unreliable and more volatile after that. This is what we call ‘market noise’.

 

What you can see in Figure 1 is that price has started to gain some bearish momentum, before retracing back up to an area that had previously acted as a good area of support/resistance. When a pin bar formed right at this level, this would have been a good opportunity for a short trade. If we had put an order in at a 50% retracement of this pin bar, with a stop loss placed just a few pips above the high of the move and a with a target of two times our risk – our order would have been filled.

Figure 2 shows this setup more clearly. The highlighted candle is the pin bar in question. As you can see, had we took this trade with a target of two times our risk, we would have made a very nice 2% rise on our bank in a very short space of time (around two days). Well, that’s it for today, and I’ll be back with more price action trade examples tomorrow.

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