Trade Example – EUR/USD

Filed under: Learn Forex Trading |

I have a trade example for you today on the EUR/USD forex currency pair (the pair for the euro and the United States dollar). This is one that I almost put an order in for, but as I’d just returned from a break, I felt that it was a little too early to get involved in the market (as I was aware that I was eager to get involved!).

Figure 1.

Figure 1.

 

If you take a look at Figure 1, you will see the setup in question. This is the daily timeframe chart for the EUR/USD pair, and it is the only timeframe that we will need to look at for this particular setup. What you can see is that, over the past couple of weeks, there has been some considerable bearish pressure in the market. The 8-day exponential moving average has crossed below the 21-day exponential moving average, and the vast majority of days in those couple of weeks have seen black bearish candles. The possible entry is the candle that I have highlighted in green. This is what is known as a bearish pin bar, and if you see one of these in a strong bearish trend, then it can provide a good entry point.

 

What you could have done at the close of the bearish pin bar was to put an order in 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 at least two times the risk. Had you done this with a risk-reward of 1:2, then your order would have been filled and the target met. Of course, you could have also stayed in the trade and managed it, and perhaps an even bigger risk-reward scenario is possible, given that this bearish momentum is currently continuing.

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