Trade Example – EUR/JPY

Filed under: Learn Forex Trading |

I have just closed an order that was not filled, but I would like to take you through the ins and outs of the setup anyway as a learning exercise.

 

Figure 1.

To begin with, as always, take a good look at Figure 1. This is the daily chart for the EUR/JPY forex currency pair. This is the only chart that we will need to look at for this setup, as all of the information that we need is neatly contained within this graph.

 

What you can clearly see from the chart is that the 8-day exponential moving average is crossed nicely above the 21-day exponential moving average, signally that this pair is very bullish, especially since these moving averages are actually diverging even further apart. For this reason and this reason alone, it is much better to be on the lookout for long trades in this market. I have also marked in a significant area of support/resistance, which is a swing high point (marked in with a horizontal green band). Once price broke through this level of resistance, I was then looking out for this level to become a new support level, and I was looking for any price action signals to confirm this.

 

So, when a nicely defined pin bar penetrated this area and reversed, I thought it was a good opportunity to put a long order in. I put an order in to go long at a 50% retracement of the pin bar, with a stop loss placed just a few pips below the low of the pin bar, and with a target set of two times my risk. Unfortunately, the order missed out on being filled by just a few pips before exploding upwards and going past my target. It seems it was the right play, but sadly, the order just missed out on being filled.

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