Trade Example – EUR/CAD

Filed under: Learn Forex Trading |

There isn’t a great deal setting up for us at the moment. However, there was a trade setup on the EUR/CAD that we missed last month – so let me take you through the ins and outs of that right now.

If you look at Figure 1, you will see the daily chart for the EUR/CAD forex currency pair, which is the pair for the euro and the Canadian dollar. This is not one of the major pairs, but there is sufficient liquidity to justify it being kept on the radar.

 

The candle that we are most interested in here has been highlighted for you in yellow. This is what we call a pin bar, because price moved one way, and then moved all the way back all in the space of one session – which on this chart is 24 hours.

 

Price had been moving up quite nicely. The 8-day exponential moving average had crossed over the 21-day exponential moving average, signalling that the market sentiment had changed. There had also been a lot of white bull candles, and in this kind of market, we should only really be looking for long trades so that we go with the recent momentum.

 

The highlighted pin bar formed in the direction of recent momentum, and this was a good signal to get long. If we had set an order to enter the market on the long side at a 50% retracement of this pin bar, our order would have been filled. We could have placed a stop loss just a few pips below the low of the pin bar, with a target of two and a half times our risk. As you can see, this trade would have been successful for a nice 2.5% rise on our bank. That’s all for today – more tomorrow.

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