Trade Example – GBP/AUD

Filed under: Learn Forex Trading |

Welcome back after the bank holiday break (in the UK) – I hope that you all had a good one. I’m back today with another price action trade example for you; and this time it is on the GBP/AUD forex currency pair, which for those of you that are not familiar, is the pair for the British pound and the Australian dollar.

 

Figure 1.

To begin with, take a look at Figure 1. This is the daily chart for the GBP/AUD pair. First, we have to assess the trend – and this proves to be a little tricky with this chart. The chart seems to move up, consolidate, and then move down. However, if you look at the chart from around the 12th of May, then the chart is just moving down.

 

The candle that we are most interested in on this chart is the pin bar, which I have highlighted in yellow. This came at a previous area of support. However, as price has now broken through this support area, we can say that there has been a change of polarity, and that the pin bar has rejected this area. There is also added evidence that the market is turning bearish, with the 8-day EMA crossing below the 21-day EMA. This, together with the bearish pin bar at an area of support/resistance, would be enough for us to take a short trade at a 50% retracement of the pin bar, with a stop loss placed just a few pips above the high of the move, and a target of two times our risk.

 

As you can see, this trade would have been successful for a nice 2% rise on our bank. You have to be careful with counter-trend trades, but this I feel does not fit into that category, as the trend was visibly changing. Well, that’s it for today – more tomorrow.

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