Trade Example – CHF/JPY

Filed under: Learn Forex Trading |

 

While we are still waiting for our two live trades to come to fruition, I have a trade example for you today on the CHF/JPY forex currency pair, which is the exchange rate between the Swiss franc and the Japanese yen.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily timeframe chart for the CHF/JPY pair, and this is the only timeframe that we will need to look at for this trade example. Often, we do use the lower timeframe charts (namely the 4-hour and 1-hour charts), but on this occasion, all of the information that we require is in the daily timeframe chart.

 

As you can see, the chart is visibly moving down from left to right. This immediately tells us that the pair is bearish. We can also see that the 8-day exponential moving average is crossed firmly below the 21-day exponential moving average, and that the two moving average are, if anything, diverging even more. In this kind of chart, we should only really be looking to take short trades in the direction of this overall momentum.

 

I have also drawn a horizontal line in on the chart to mark a significant area of support/resistance. So when price broke through this level, formed a bearish pin bar (highlighted) that was rejecting this level and also bouncing off the 8-day exponential moving average, this looked like a good area of confluence and a good time to put an order in at the break of the low of the pin bar, with a stop loss just a few pips above the high of the move, and a target of three times our risk. As you can see, this trade would have been successful for a very nice 3% rise on our bank. That’s it for today – more tomorrow.

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