Trade Example – GBP/CAD

There are no live trades yet again today. It seems like we are going through a spell where just nothing is setting up for us. So once again, I will be taking you through a trade that we missed, this time on the GBP/CAD forex currency pair.

Figure 1.

To begin with take a look at figure 1. This is the daily chart for the GBP/CAD pair. You will see that the blue EMA has very recently crossed above the red EMA, which signals that we are starting a new bull trend. There has been a succession of white bull candles, so there is a good deal of momentum. What we want to do is to hop on to this trend and ride it a little way. We can do this by finding price action signals when price retraces to value areas.

Figure 2.

Figure 2 shows the 4-hour chart for the same GBP/CAD pair. What we can see here is that price took a breather on the way up, and formed a kind of base (marked in with a horizontal red line) that is acting as support. Price then formed an inside bar setup (highlighted in yellow), which would be a good time to put an order in to go long at the break of the mother candle of the inside bar, with a stop loss placed just below the low of the move, and a target of two and a half times our risk. We could also place a trailing stop to one times our risk, just in case the trade starts to move against us once we are in some profits.

Figure 3.

Figure 3 shows that the trade would have been successful, for a 2.5% rise on our bank in a relatively short space of time. This is what price action trading is all about – finding a high probability setup with a good risk reward. More tomorrow.