Trade Example – EUR/JPY

Filed under: Learn Forex Trading |

 

There is not a whole lot setting up on the daily forex charts today, so I thought I would talk you through a trade example on the intraday charts right now – and more specifically, a setup on the 4 hour timeframe on the EUR/JPY pair (the pair for the euro and the Japanese yen).

 

Figure 1.

Figure 1.

To begin with, take a good look at Figure 1. This is the daily chart for the EUR/JPY pair, and this is the timeframe that we will use to assess the trend and any important areas of support/resistance. What you can see is that the pair has a very important level of support/resistance at the top of the chart. I have marked this area with a horizontal green band, and this is the area that we should watch out for on the intraday charts for any bearish price action signals.

 

Figure 2.

Figure 2.

If we now zoom in to the 4-hour timeframe (see Figure 2), you will see that our level of support/resistance was indeed reacted to. A nice pin bar formed which bounced right off of this level, and it was here that an order could have been placed to go short. The most profitable way to trade this would have been to go short at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the pin bar, and with a target set of several times the risk. Had you entered this trade and moved your stop loss up accordingly, you could have made a massive ten times your risk or more. However, only a brave trader would have taken this one on, as many of these intraday signals do fail. Anyone who was brave enough though, would be laughing, as a ten percent rise on your bank can sustain your trading for weeks.

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