Trade Example – EUR/CHF

Filed under: Learn Forex Trading |

 

I have yet another forex price action trade example for you today; and this time, it is on the lesser popular EUR/CHF currency pair, which is the pair for the euro and the Swiss franc.

Figure 1.

 

If you take a look at Figure 1, you will see the daily chart for the EUR/CHF pairing. For those of you who don’t know, on a daily chart each candlestick represents 24 hours worth of price action movement. It is probably the most reliable chart to use with regards to support/resistance levels as the majority of professional traders look at the daily charts.

 

What you can see on this chart is that price is slowly moving down from left to right. It has been a gradual decline, but a decline nonetheless. The 8-day exponential moving average is crossed firmly below the 21-day exponential moving average, which confirms that the pair is in a downtrend. Therefore, when a pair is trending like this with some bearish momentum, we should only really be looking to hop onto this momentum and take short trades.

Figure 2 shows the 1-hour chart for the same EUR/CHF pair. What you can see here is that price had retraced to the 150-hour exponential moving average and then reacted with a bearish engulfing pattern. The 150-hour exponential moving average is often respected, and therefore acts as a very good area of support/resistance. This would therefore have been a good time and place to go short by placing an order at a 50% retracement of the bearish candle, with a stop loss just a few pips above the high of the move and a target of two and a half times our risk. As you can see, this trade would have been successful for a 2.5% rise on our bank. That is all for today – and I’ll be back with more tomorrow.

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