Trade Example – EUR/USD

Filed under: Learn Forex Trading |

Our live trades are not going terribly well at the moment, as can be evidenced from our cumulative profit/loss figures in Figure 1. This downturn had not been helped by the fact that I have missed one or two good trade setups. One of these came on the EUR/USD pair, and I will talk you through this setup right now.

 

Figure 1.

Figure 2 shows the 4-hour chart for the EUR/USD pair. What you can see here is that price had been moving up towards a significant level of support/resistance (marked with a horizontal green band). This level has been marked in on the daily chart, and it is an area that should have been watched closely for any price action signals on the intraday 4-hour and 1-hour charts.

 

Figure 2.

As you can see, a nice bearish pin bar formed right at this level. We could have put an order in at the close of this pin bar 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 set of two or three times our risk. As you can see, a risk-reward scenario of 1:3 would have come off, which could have resulted in a very nice 3% rise on our bank. Unfortunately, this is one that I missed due to other responsibilities. I like to think that as the forex market is 24-hours, that there are always other trade opportunities if one is missed. But on this occasion, I rather regret missing this nice looking setup. The only thing against the setup is the fact that we would have been going against the trend and momentum, as the pair is currently bullish. However, occasionally, if the setup is strong enough, we can take a contrarian trade and go against momentum – but the setup has to be right.

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