Trade Example – EUR/USD

Filed under: Learn Forex Trading |

I have a trade example for you today going back to 2010, and this is a trade that I took on the popular forex trading software ‘Forex Tester’, which I have been using for a few weeks now and rate it very highly.

 

Figure 1.

Figure 1.

If you take a look at Figure 1, you will see the setup in question. The pair had been slightly moving up, but there were signs of the bull trend stalling. First, a large bearish candle (also known as ‘dark cloud cover’) formed, creating an area of resistance in the market that we could keep an eye on. If price failed to breakthrough this level again, then it could have been a sign that the bears were taking over.

 

If you look at the chart again you will see that a very nice bearish pin bar formed right at this level. It was here that I put an order in to go short at a 50% retracement of the pin bar (which often happens), and I set a target at the area just above the other pin bar on this chart, the long bullish pin bar with the massive tail. This provided a healthy risk-reward scenario of well over 1:4. What happened next was the reason why I have provided this trade example – as it is really a textbook example. The entry was perfectly filled at the 50% retracement of the pin bar, and then, in the next day of trading, the bears took total control. By the end of the trading day, our target was met for a very nice 4.3% rise on the bank, and price stopped right at this level where the aforementioned low of the bullish pin bar had been. You really cannot get a neater example of price action trading than this!

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>