Trade Example – EUR/JPY

Filed under: Learn Forex Trading |

 

There are not a lot of trading opportunities around at the moment. There have been a lot of gaps up/down in the forex markets today (or last night to be precise at the open of the new week), and many of the established trends look like coming to an end.

 

Figure 1.

Regardless of this, I do I have nice little trade example on the EUR/JPY pair for you, which is the pair for the euro and the Japanese yen. To begin with, take a look at Figure 1. This is the daily chart for the EUR/JPY pair, and we can use it to assess the trend, and to mark in any significant areas of support/resistance.

 

As you can see, the chart visibly moves down from left to right and the 8-day EMA is crossed below the 21-day EMA; so the long-term trend is bearish. However, the moving averages have started to move closer together, so we must be cautious with any trades. I have also marked in a nice level of support/resistance, which has already held very well on three occasions.

 

Figure 2.

Figure 2 shows the 1-hour chart for the same EUR/JPY pair. What we can see here is a big gap up in the market, followed by a large pin bar that pierced the level of support/resistance that we were talking about. We could have put an sell order in here at a 50% retracement of the pin bar, with a target of at least two times our risk, and a stop loss just a few pips above the high of the move. As you can see, this trade would have been successful for a very nice 2% rise on our bank. If you had gone for a greater risk-reward scenario, then it remains to be seen whether the pair will continue to move lower. That’s it for today – more tomorrow.

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