Trade Example – GBP/AUD

Filed under: Learn Forex Trading |

I have a forex price action trade example for you today on the GBP/AUD currency pair, which for those of you that still don’t know is the pair for the British pound and the Australian dollar. To begin with, let’s take a look at Figure 1.

 

Figure 1.

Figure 1 is the daily chart for the GBP/AUD forex currency pair, and it is the chart that we shall use to assess the long-term trend. As you can see, the 8-day exponential moving average has recently crossed below the 21-day exponential moving average, which signals a shift in market sentiment from bullish to bearish. The chart is also visibly moving down from left to right and there are many more black candles than white ones. All of this tells us that the current momentum is bearish, so we should only be looking to take trades that confirm this bearish momentum.

 

Figure 2 shows the 1-hour chart for the same GBP/AUD currency pair. I have market in a significant pattern by highlighting the candle in question in yellow. This is called a bearish engulfing pattern, and it has occurred right at the 150-hour exponential moving average, which is often a very significant area of support/resistance on the 1-hour chart.

 

Figure 2.

We could have put an order in here at a 50% retracement of the bearish candle, with a stop loss just a few pips above the high of the move, and a target of two and a half times our risk. As you can see, this trade would have been successful as price continued to move down, and our bank would have seen a very nice rise of 2.5% in a very short space of time. Well, that’s all that I have for you today, and I’ll be back with another trade example tomorrow.

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