Trade Example – GBP/CAD

Filed under: Learn Forex Trading |

I have another trade example for you today on the GBP/CAD forex currency pair, which for those of you that don’t know is the exchange rate between the British pound and the Canadian dollar.

 

Figure 1.

To begin with, take a look at Figure 1. This is the chart for the daily timeframe for the GBP/CAD pair; and this is the only chart that we will need to look at for this trade setup as all of the information that we require is located in this chart. Often, we use the 4-hour and 1-hour timeframes to find our price action setups, but on this occasion, there is a very nice price action setup on the daily chart.

 

The candle we are most interested in is the pin bar that I have highlighted in yellow. As far as the trend goes with this pair, we seem to be in a period of transition. The 8-day exponential moving average has just crossed below the 21-day exponential moving average, which suggests that this market is now bearish. We can also see that there are many more black candles than white ones on this chart, and that it has been moving roughly downwards since the high on the 8th May.

 

There is also a very nice area of support/resistance on the chart, which I have drawn in with a thin red horizontal line. As the pin bar is penetrating this horizontal level, and it is in line with the new trend, we could have put an order in to go short at a 50% retracement of this pin bar, with a stop loss a few pips above the high of the move, and a target of two times our risk. As you can see, this order would have been filled on the second day and we would have made a nice 2% rise on our bank. More tomorrow…


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Your email address will not be published.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>