Trade Example – GBP/AUD

Filed under: Learn Forex Trading |

I’ve got another forex price action trade example to show you today, and this time, the setup comes on the GBP/AUD currency pair, which for those of you that are still not familiar with these pairs, is the exchange rate for the Great Britain pound and the Australian dollar.

 

Figure 1.

If we begin by looking at Figure 1, you will see the daily chart for the GBP/AUD pair. This chart visibly moves up very nicely from left to right, telling us that the pair is in a bull trend. To confirm this, we can see that the 8-day exponential moving average is crossed firmly above the 21-day exponential moving average, and it has been for some time. In this kind of bullish momentum, we only really should be looking to enter the market on the long side, so we are looking out for any short-term pullbacks to areas of value.

 

Figure 2.

If you now look at Figure 2, you will see the 4-hour chart for the same GBP/AUD pair. What you will see here is that a very nice pin bar formed in the direction of the long-term bullish momentum, and this also happened to be a very strong area of support/resistance on the chart. This would have been a good time to put an order in at a 50% retracement of the pin bar, with a stop loss just a few pips below the low of the move and a target of three times our risk.

Figure 3 shows that this trade would have been very successful indeed for a very nice 3% rise on our bank. We could have had five or six times our risk, or even more on this trade had we let it run, so it just goes to show the power of having a positive risk-reward scenario. That’s it for today – more tomorrow.

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