Trade Example – EUR/NZD

Filed under: Learn Forex Trading |

I have a trade example for you today on the EUR/NZD forex currency pair, which for those of you who are not sure is the pair for the euro currency and the New Zealand dollar.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the EUR/NZD currency pair, and it is the chart that we will use to assess the long-term trend. As you can see, the chart visibly moves down from left to right and there are many more black candles than white ones. It also shows that the 8-day exponential moving average has recently crossed below the 21-day exponential moving average. All of this tells us that the market is bearish, and as such, we should only be looking out for any price action signals that confirm this bearish momentum.

 

Figure 2.

Figure 2 shows the 1-hour chart for the very same EUR/NZD currency pair. What you can see here is that a nice bearish engulfing pattern has emerged (highlighted in yellow) right at the 150-hour exponential moving average, which is often a very significant area of support/resistance. We could have taken a short trade here at the close 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, price dropped after this and our trade would have been successful for a very nice 2.5% rise on our bank. These kind of trade setups are high probability setups, and while they do not work out every time, over a long series of trades and with a risk-reward setup of at least 1:2 on every trade, you should come out on top. That’s it for today – more tomorrow.

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