Trade Example – EUR/GBP

Filed under: Learn Forex Trading |

 

I have no trade alert results to tell you about today, so instead, I am going to run through a trade setup that we missed, a setup on the EUR/GBP forex currency pair, which is the pair for the euro and the Great British pound.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the EUR/GBP pair, and it is the chart that we look at to find any significant areas of support/resistance, and to assess the recent trend and momentum. What we can see from this chart is that the 8-day EMA has crossed over the 21-day EMA, signaling that a trend change may be imminent (but it is not yet confirmed). We can thus say that the momentum is up to neutral. We also have price making a 62% Fibonacci retracement at a key area of support/resistance, marked with a green band, so we should be watching this area for any price action signals on the daily, 4-hour, and 1-hour charts.

 

Figure 2.

If you now look at Figure 2, you will see that a very nice bullish engulfing pattern formed right at this key level, which should have been our signal to get in on a long trade. We could have entered at the break of the bullish candle and placed a stop loss just a few pips below the low of the move; and our target should be at least two times our risk.

 

Figure 3.

Figure 3 shows that price almost hit our stop loss, but the engulfing pattern held as support as they often do, and price subsequently moved up and a target of two times our risk would have been met. This is another good example of a price action setup at a key area of support/resistance. That’s it for today – more tomorrow.

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