Trade Example – EUR/USD

Filed under: Learn Forex Trading |

I have an interesting trade example for you on the EUR/USD forex currency pair today. Let’s get straight into it…

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the EUR/USD pair, and it is the only chart that we will need to look at for this particular setup. At the bottom of the chart, you will see that I have drawn in a swing low point, which acts as a significant area of support/resistance (this is marked with a green band). As you can see, price broke below this band, and then started to mount some upward pressure and challenge this area. There were several bullish pin bars, but all of them stalled exactly at our support/resistance zone. The area was holding extremely well. We then had a break above this area, but it failed and resulted in a bearish pin bar. Although this candle also had a long lower shadow, I saw this as bearish because a very strong area of support/resistance had been broken and rejected. It seemed that price simply could not break above this level, which meant that there was only one way for price to go.

 

To add to all of this information, the long-term trend was also down. The 8-day exponential moving average was below the 21-day exponential moving average, and we could also visually see that the chart was moving down from left to right. At this point, with the strong bearish momentum, the strong level of support/resistance that could not be broken, and a bearish pin bar, we could have 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 a target of two times or risk. This trade would have been successful for a very nice 2% rise on our bank. More tomorrow…

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